Construction is rumored to be the second riskiest industry in
the U.S., second only to the restaurant business. The risks are
magnified during a market recovery, particularly after a long
downturn. Prospering in cyclical markets and surviving a recession
in the construction industry starts with recognizing what will
happen in the marketplace when a market softens and then
When there are fewer projects in any market, competition
intensifies and prices and potential profits diminish. The ideal
situation in a shrinking market would be for each contractor to
accept proportionately less work so the market share of each
business is maintained. However, there is a tendency in the
construction industry to resist, sometimes strenuously, any
reduction in sales and to fight vigorously for the fewer available
projects, driving down prices for everyone.
Conversely, cooperating with the market and downsizing to align
your organization with market realities is appropriate management
of the risks imposed through an environment outside your control
and in preparation for an eventual recovery. You cannot control the
market, but you can control your response to it.
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