*The insights and recommendations shared in this article are based on the circumstances of March 23rd 2020
The spread of COVID-19 continues on a global level. Even though above all we are concerned about the well-being and health of everybody, we also notice the worrying downward development in many industries. Construction companies are not exempt; so what can they do to soften the impact of the crisis? We have compiled six short-term measures.
The coronavirus continues to spread, and presents us with a global economy and business environment crisis that is absolutely unique. Why? Because as far back as we can remember, there has not been a global healthcare crisis such as the COVID-19 pandemic. The resulting lockdown of public life and business operations is unprecedented. Due to the high level of insecurity and unpredictable dynamics, consumer demand is significantly slowing down. There are no easy solutions to meet these challenges. Still, we have been closely monitoring this development and want to offer you six measures on how construction companies can immediately react to protect bottom- and top-line.
- Manage supply shortages wisely: In case your supply chain is disrupted, communicate quickly and in a transparent manner with your customers on availabilities. Plan volume allocation based on proper, value-oriented customer segmentation. Segmentation based on customer size and potential is not enough. Review your current segmentation and take the opportunity to upgrade your CRM system accordingly.
- Be cautious on price, do not be opportunistic: This is not the time to reduce prices to counter the drop in volume, since the crisis, not your pricing, is behind any reduction in demand. But it is also not the time to push through price increases or opportunistic price moves. Construction companies are in a crisis planning and response mode right now, which is why their ability to pass through price increases successfully is limited.
- Guide your sales teams on how to secure short-term cash flow: Ensure your sales team is focusing on following up on pending offers and opportunities as well as identifying cross-selling opportunities at existing accounts. Advise them to reach out to inactive accounts. Manage projects that are at the final decision stage closely with all stakeholders (investors, contractors, and dealers). Start to effectively manage outstanding receivables and DSO (Days Sales Outstanding). Reduce working capital. These are highly effective tasks and good examples for activities that your employees can handle while working at home.
- Fully embrace digital tools and technologies: Be aware that this crisis might act as a catalyst for preparing teams to fully embrace digital tools. When sales teams are not allowed to travel anymore, the importance of digitalization becomes obvious. Review your sales processes (including channels) and your customer journey and identify the steps that can be digitally supported. Stop knocking at your customer’s physical door, consult via video conferences instead.
- Create a cross-functional commercial crisis team: This team, comprised of stakeholders from management, sales, and marketing, acts internally and externally as responsible points of contact to individuals. Their task is to communicate regularly and frequently, using crisis-specific commercial dashboards (rather than exchanging “anecdotal evidence”). In addition, we suggest to form designated task forces to prepare for the recovery phase. Flexibly reallocate your best resources to these task forces.
- Keep a long-term perspective: While the duration of the crisis and the exact shape of the recovery are unclear, we know that this crisis will be temporary. Do not act short-sighted on the basis of pure profit opportunities. Do not strain customer relationships due to short-term windfall gains.
In a fast-changing, volatile situation like the one we all are experiencing right now, fast decisions and an adaptive approach are required. Hopefully it will not be long until we can start thinking about recovery measures. Take care!