Dispatch #29 - Make Time to Create a Coronavirus Plan B

In a 2017 blog post, I advised contractors to create a “Plan B” based on a 20% drop in revenue. I am revising that guidance to say you should create your Plan B based on a 50% drop in revenue.
 
The 50% mark is not a prediction about the economy or your company’s revenue. It is guidance that given the extreme economic risk from the COVID-19 pandemic, not having a viable Plan B reduces your construction firm’s chance of survival and limits the extent of its success.
 
Your Plan B is meant to be a profit and cash flow model based on much lower revenue. No more, no less. 
 
Worst case scenario:

You don’t have a viable Plan B, revenue drops by 50%, and−

• Your company and personal net worth take a substantial hit

• Preventable losses are incurred, and

• A messy company liquidation or bankruptcy ensues.

Better scenario:

You create a viable Plan B and−

• You decide it’s not the kind of company you want to run and the Plan B turns into a “swift and orderly wind-down” plan; or

• You decide it is the kind of company you want to run−smaller but more effective and efficient−until revenue growth resumes.

My own Plan B for David Stern CFO, Inc. requires sacrifice. But I’ll execute it if and when necessary in order to stay the course and execute my long-term business plan.
 
It took 30 minutes to create my Plan B. Scale that up for the volume and complexity of your construction firm and give your leadership one full day to create a viable Plan B. If you hole up in a virtual room, phones off, with financial information at your fingertips, you can have it done by tomorrow.

Need help with this or other financial matters faced by construction contractors? Let’s talk!

David Stern CFO makes every effort to provide useful and accurate information. This content, however, is not intended as a substitute for specific business-related financial advice. We disclaim all warranties and liabilities from its use.