This hibernation model, coupled with the cash generating model for contracting, explains a number of pressures that contractors are facing as we emerge from recession. A long hibernation period, as we have faced since 2009, means that companies have used more of their financial resources than they may have anticipated during the recession. As a result these companies have less funds and they now need to win work to generate the cash required to support their businesses. One result is that competitive tenders remain highly competitive at a time when input prices are rapidly increasing.
If this construction business model is unsuitable for this phase of the economic cycle then what is appropriate? Clearly a business that generates a return during a recession is more robust as it can invest and prepare for an improving market. Historically, contractors used to hold significant property interests that provided both an income during recession and assets to support a growing turnover post-recession. Other models exist, but this is the one that Stepnell follows as our historic property interests support our construction activities.
James L. Salmon, Esq.
300 Pike Street
Cincinnati, Ohio 45202
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