This is an interesting time to be operating a business. Here are some of the major issues that are impacting your operation.
- Prices of lumber have tripled in the past year
- Steel prices have more than doubled this year
- Fuel prices have steadily increased due to reduction in domestic supply and increased demand. Now the East Coast pipeline shut down will add to that significantly
- Most companies are having trouble finding both general and skilled labor. Unemployment is still high but the supply appears to be restricted due to generous payments to “not work” as well as increased demand for new workers.
- Prices for required insurance has increased significantly
- The supply of available building products is substantially limited from lumber to appliances
- Taxes will no doubt increase to cover the size and scope of government spending. The amount of new “money creation” is astounding and will have significant long term challenges
- The cost of new vehicles are increasing an the supply is diminishing due to supply increases and computer chip supply issues as well as covid shut downs
All of the above issues should cause business owners to take a proactive approach. Here are some of my recommendations:
- Know your costs when writing estimates and adjust your pricing as needed. Submit your price increase notices to X8 and insurance companies frequently
- Have limits to your estimates of less than 30 days and maybe as short as 2 weeks.
- Have suppliers offer bids for job materials and make sure you are getting a good value on the job and shop materials that you are purchasing
- Proactively manage your inventory. Not having supplies will restrict your ability to complete jobs and purchasing too much will impact your margins later if the prices fall.
- Protect your profits and cash. Make sure that you have capital to limit your risk and also meet future overhead expenses that may be unexpectedly higher than previous years.
- Be cautious about creating long term solutions for short term pricing problems. Increasing wages is a strong temptation but will need to be maintained in the future regardless of short term pressures
2020 was a real challenging year for business owners, families, and employees across the county. Many of last year’s issues have subsided, however, they have been replaced by new and different challenges. It is important that you are both aware and nimble. Your leadership was challenged last year and it looks like it will be again this year – although in different ways. Be proactive and strategic in your business and create and manage your response to changing conditions.