When a construction firm’s backlog falls off, the pressure on the company escalates and “recession” takes on a new meaning regardless of the actual definition of the word. Prospering in cyclical markets and surviving a recession starts with recognizing what will happen when a market softens. The result is totally predictable and has occurred without fail in every industry down cycle for the last 50 years.
When there are fewer projects, competition intensifies and prices and potential profits diminish. The ideal in a shrinking market would be for each contractor to accept proportionately less work so that market share of each business is maintained. But there is a tendency in our industry to resist any reduction and to fight vigorously for fewer available projects, driving down prices for everyone. Trying to maintain volume in a declining market is, in effect, an attempt to increase market share, and any increase in market share is universally “bought” at a cost.