The outbreak of the novel coronavirus has caused major disruptions for many different types of businesses. Construction and skilled trades contractors are working hard to keep their businesses afloat in difficult economic conditions. Simultaneously, they’re devoting a greater focus to obeying new safety rules and working with owners and subcontractors whose circumstances may have changed.
These five strategies have emerged as some of the most important ways for contractors to keep their businesses strong in a post-COVID-19 world. From taking steps to mitigate disease risk to keeping your contractor surety bonds current, here are five ways that you can make your contracting business more resilient.
Maintain strong liquidity and stay agile.
The financial disruptions caused by the coronavirus outbreak can create dangerous chain reactions that damage multiple businesses. Contractors who have difficulty collecting receivables may struggle to meet their own obligations, creating downstream problems for subcontractors, suppliers, and project owners.
Thus, it’s crucial to have the cash reserves to meet your most important financial obligations if an important source of revenue suddenly disappears. If your business has been operating near the margins, it’s time to seriously analyze your cash flow and take the steps to improve it. Automate invoicing to ensure that it’s consistent and on time, use financing for purchasing equipment and supplies, and minimize new purchases to what is absolutely necessary.
Be ready for supply chain disruptions.
The pandemic has shaken supply chains around the world, and many businesses are still dealing with higher-than-normal rates of supply chain disruption. From late shipments to closed warehouses, contractors need to be ready for the unpleasant logistics shocks that COVID-19 can bring.
Being prepared for a disrupted supply chain can take many forms, including:
- Making connections with alternate suppliers before you need to
- Increasing flexibility in upcoming project schedules
- Seeking out local materials suppliers to reduce logistics difficulties
- Creating more flexible materials budgets
Be sure to discuss the possibility of supply price changes and delays with clients ahead of any issues to properly manage their expectations.
Continue to prioritize job site safety and social distancing.
Contractors must abide by the best practices prescribed by the CDC and local health authorities. These differ between contractors and states, but some important precautions include:
- Requiring social distancing at any job site where it’s feasible
- Requiring properly worn masks on job sites where social distancing isn’t possible
- Taking workers’ temperatures before they enter a job site
- Requiring self-isolation from individuals who have been exposed to coronavirus
- Limiting the number of subcontractors simultaneously present at a site
- Practicing good job site sanitation such as handwashing
- Sharing tools as infrequently as possible
Once again, it’s critical to communicate with your clients proactively to ensure that your clients understand that distancing and limiting subcontractors may shift delivery schedules, but even some delays are preferable to closing the job site for a period of time if COVID-19 infections are discovered.
Understand and manage your legal obligations under performance and payment bonds.
When a contractor purchases a performance and payment bond, they accept ultimate financial liability for the satisfactory completion of a project and payments to suppliers. In an unprecedented global crisis such as the coronavirus outbreak, it’s important to understand and manage your obligations under these surety bonds.
If you’re working under a performance bond, check the force majeure clause in your contract. Put simply, a force majeure clause specifies the rights that the parties have in case of an unpredictable natural event that makes contract fulfillment impossible. Communicate with the project owner early and often about any potential project delays, and consult a construction attorney to learn whether force majeure may be applicable to delays on your project.
Payment bonds are another key area to be aware of during a period of disruption. A contractor can be penalized under the terms of a payment bond for failing to pay suppliers on time, so make sure to communicate with suppliers and ask for a payment extension if you need more time.
Make sure your contractor bonds and insurance are up to date and provide sufficient coverage.
Contractor bonds and insurance are how contractors protect their customers and themselves from unforeseen challenges. Thus, it’s crucial to have both in effect while navigating the coronavirus crisis.
What is a contractor’s bond? It’s a type of surety bond that serves as your legal guarantee to customers that your business will honor its legal and ethical obligations. Trust between a project owner and contractor is more important than ever, so make sure that your contractor surety bonds are up to date and in force.
Insurance products such as business interruption insurance can help your contracting business survive disruptions from the pandemic. The Business Owners’ Policies (BOPs) that many small businesses use for insurance often include business interruption insurance, so review your BOP to see if yours does.
Obtaining the right contractor bond is one of the many keys to operating a compliant contracting business that protects its customers. Surety Bonds Direct makes it simpler and more cost-effective to get a contractor surety bond. You can get a free contractor surety bond quote online today, or call 1-800-608-9950 to talk to our bond experts. Many quotes are available instantly, and our friendly customer service makes the process fast and easy.