Construction News from the L.A. Times

The LA Times reports from California. "John Rockey has been hanging drywall for 35 years, and he's seen it all in the boom-again, bust-again Antelope Valley housing market. By the time a new building spree peaked in 2005, Rockey's payroll had again grown to 200. Now, his Lancaster-based Progression Drywall Corp. is down to 50 employees, and he's got a serious case of deja vu."

"'This is looking like 1990 all over again,' he said."

"'A lot of people are panicking,' said Jaimes Gumaro, a North Hollywood real estate agent who has a listing in a Palmdale neighborhood dotted with homes for sale. 'They were expecting to have all this equity, and then it suddenly stopped. Now, they just want to get their money out of it. They're saying, 'I'm outta here.'"

"Foreclosure sales in Lancaster and Palmdale rose to nearly 200 between Dec. 1 and Feb. 28, an eightfold increase in a year. Notices of default more than doubled over the same period a year earlier, totaling more than 1,000 from December through February."

"'Now, we have all these folks who can't afford their homes and their loans are adjusting, literally by the thousands,' said Peter Terracciano, who founded his Palmdale brokerage in 1990, as the housing boom began to go bust."

"Rockey gets most of his work from large builders. 'Every customer has a different story every day,' he said, 'and they're not good stories.'"

"He recently learned that the builder of 300 new houses he'd been lined up to drywall in Rancho Cucamonga abruptly halted the project, costing Rockey $4 million in work. 'We're getting killed,' he said."

Think Before You Cut Payroll

Many business owners think the key to profit it to cut costs. You might choose to cut corners with your materials or with your overhead expenses. Businesses large and small have been using this method, thinking it's the perfect way to help out their bottom line. It's truly not the best way to conduct your business. A major home improvement store has tried this method over the last few years and has failed miserably.

One of this company's major overhead expenses was payroll. They cut payroll to boost profits and have hurt their business in the long run. Many consumers used to shop there because they needed help and could always find an employee to answer their questions. With payroll cut, and less help available, customers stopped going. When they stopped shopping, guess what happened? Sales and profits fell considerably.

Stop and think about what the consequences will be if you do not offer adequate service to your clients. Every business needs to maintain a healthy profit margin to keep going. But there has to be a balance. Cutting costs is only one segment of the business triangle - there is also increasing prices and increasing sales. When sales fall, one of the biggest mistakes a company can make is to lay off their work force. You see major corporations do this all the time. With payroll cut, they figure they can ride out the financial storm. What usually happens? Service and product quality always, always suffers and the customers stop buying what was being sold. Which of course cuts further into profits.

In order to do your best work as a service professional, you need to have the staff and subcontractors available to make sure clients are happy. Happy clients will continue to use your company, will refer your business to friends and family, and will provide you with quality testimonials and references to keep revenue coming in and profit margins strong.