Blog
Surviving Today's Business World - Good Management & Planning
As an association, we can see clear trends in the business environment and how they are evolving over time. A couple of specific trends are evident. First, firms are going out of business on a consistent basis. Second, larger firms are acquiring smaller firms through buyouts. Why are these trends occurring?
As an association, we can see clear trends in the business environment and how they are evolving over time. These trends are visible at a regional level within our AGC chapter and statewide through our affiliation with the AGC/SIF Workers Compensation Fund. Data available from seven construction associations participating in the fund give a clear picture of what is occurring among construction firms within Kentucky. A couple of specific trends are evident. First, firms are going out of business on a consistent basis. Second, larger firms are acquiring smaller firms through buyouts. These trends are having an impact not only within our industry but with associations as well.Why are these trends occurring? There are several reasons. In today's world it is difficult to keep pace with the costs associated with maintaining a successful business. These include good financing to have the cash flow to pay workers, and to buy equipment and materials on an ongoing basis; adequate bonding through company finances and assets to bid projects; meeting state and federal requirements such as workers compensation insurance, liability insurance, and licensing; complying with mandatory government regulations with the Occupational Safety and Health Administration (OSHA), Environment Protection Agency (EPA), and Department of Transportation (DOT). All of these have a cost associated with them. Add in the current workforce shortage and rising costs with inflation, and you have a very challenging business environment. Owners who lack adequate business management skills or the inability to navigate these issues can easily fall behind. In the past ten years, the AGC/SIF fund has seen a loss of over 1,000 companies statewide due to business failures or closures.
Another reason contributing to the loss of businesses is inadequate succession planning. Quite often this can be a tough subject to approach, particularly with family-owned businesses or partnerships. Firms often avoid this topic or do not take the time to make proper preparations to sell or pass on their business. Identifying and working with the right individual(s) or group to acquire and take over an existing business takes time and planning. Many firms struggle to put into action a plan to hire the necessary financial advisors, legal consultants, and others to successfully guide them through this process. Without a succession plan, the odds of a business remaining open or receiving the full worth for their built-up assets can drop dramatically.
Finally, a growing trend happening locally, regionally, and nationwide is the acquisition of smaller and mid-level businesses by large regional and national firms. Those who have created a successful business over the years often seek to benefit from what they have built. Often it is a means of financial security for them. Some owners are just tired of the daily struggles they face in maintaining a business. If the right offer is presented at the right time, it can be hard to resist. Many businesses are taking advantage of these buyouts.
Staying proactive as a business owner means continually developing good business management practices, looking ahead to the future, and creating a plan to successfully pass on or sell your business. Take advantage of AGC offerings such as the AGC/SIF Workers Compensation Fund, Kentucky Construction Industry Trust fund for health insurance, safety services, training, and the expertise of affiliated AGC members to be successful now and in the future with your business. We want you to be the best you can be!