In our 2013 year-end review article (Financial Risk, Credit Management, and Lien Law in 2013), we highlighted economic indicators and commentary that 2014 will be the year of the rebound. In preparation for the rebounding economy, it appears that business growth and expansion is a hot topic in the industry these days.
CFMA’s Connection Café has a popular thread about resources to examine when expanding a business across state lines. And this morning, Construction Executive’s Risk Management eNewsletter was published under the theme “Expanding Your Business.”
The Construction Executive newsletter included an article of mine titled “Expanding in a Rebounding Economy.” The published article gave three big picture suggestions to companies who are hoping to capitalize on favorable market conditions and expand their business in 2014. This article will address each of these three picture suggestions, and give you some back up information and additional resources to explore the topics further.
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#1: Know & Respect the Financial Risks of a Rebounding Economy
Over the past year, we’ve written a lot about the financial risks that are associated with bad economies and rebounding economies. Surprisingly, as we’ve noted, a recovering economy can be more dangerous than an economy spiraling downward. Here are a few backup resources related to the Expanding in a Recovering Economy article, as well as some other stuff we’ve written on the topic:
- ENR: Beware the Recovery: What History Teaches Contractors and Sureties
- NYT: Sudden Rise in Home Demand Takes Builders By Surprise
- Managing Financial Risk When Contractor Default Expected To Soar
- Construction Market Growing Fast: Beware of Financial Risks
Also, check out this presentation we put together on the topic Navigating Financial Risk in a Rebounding Market:
[slideshare id=20815732&doc=navigatingfinancialrisk-130508125828-phpapp02]
[zlien id=”26431″]
#2: Engage in the Financial Risk Shifting Battle
After knowing and respecting the financial risks associated with our current economic climate, the next thing to do is to take action to get ahead of that risk. This requires an understanding in the financial risk shifting battle that is taking place between the top of a contracting chain (owners, gcs) and the bottom (subs, suppliers). Here are some related articles and backup resources related to this topic:
- Financial Risk, Credit Management, and Lien Law in 2013: The Year in Review
- ENR: ENR Risk Summit: Views Differ From Places on the Payment Flow-Chart
- ENR: Owners Shift More Financial Risk as Recovery Remains Sluggish
Also, check out this presentation we put together on the topic Taking Your Company’s Financial Neck Off The Line:
[slideshare id=27977111&doc=take-20financial-20risk-20neck-20off-20the-20line-131106143140-phpapp02]
#3: When Crossing State Lines, Beware of Legal Differences Among The States
The last suggestion is to be very cautious about expanding your business if the expansion forces your company to cross state lines. While business may not be that much different state-to-state, the laws and regulatory framework is going to be drastically different. Since we’re hyper focused on mechanic liens, bond claim, credit management, and financial risk, we mostly discuss and have resources to assist companies related to these topics when traveling into new jurisdictions. Here is some articles and related backup:
- Risk Management eNewsletter: Use Caution When Crossing State Lines
- Construction Law Monitor: Problems Can Arise When Using One Contract in Multiple States
- Challenges of Subcontractor Expansion
Insofar as mechanics lien laws and practices are concerned, when crossing state lines or expanding your business in any way, refer to this presentation about the most common lien mistakes:
[slideshare id=28201196&doc=common-lien-mistakes-131113084421-phpapp02]
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