There are many reasons why a construction company might fail. Find out what some of these reasons are and how to avoid them here.
Starting any business is always challenging, and it’s no different for the construction industry. There are lots of obstacles to be overcome and unless you are prepared there is always the chance, however unpalatable, that things could go disastrously wrong.
Here are 5 ways construction companies can fail, and how you can avoid making the same mistake.
1 Start weak
Starting a new business because it’s ‘the done thing’ or just seems ‘cool’ will not get anyone anywhere. Most construction companies are inherited but there are those owners who really know what they want for their business while others do things a little more recklessly with an ‘it wasn’t mine to begin with so nothing to lose’ kind of attitude. The latter case is the one that is going to see the business fail.
Whatever you are going to do, make sure you are going into it with 100% commitment and with your eyes wide open. Starting anything with the right attitude is going to make things much easier.
2 Financial problems
One of the worst things you can do is to keep putting your own money into the business to cover expenditure – it should be the other way around. Many underestimate the amount of capital needed to run a business. This needs to be looked at carefully and always make sure you have enough to pay your employees should the worst happen and a client runs out of money.
Be as accurate as humanly possible with quotes, don’t bid low just to get the contract – it will just sting you in the end. Better to have few well-paying clients than having a lot that could barely pay the bills.
3.Lack of proper planning
It’s absolutely essential, for any business, to have a strategy in place, a business plan. This helps you not waste time or money. There are many things a contractor may overlook, things like asbestos, mold, natural disaster, structural issues etc. These are things that need to be included in a business plan, so you are prepared and know what to do.
Make sure you plan everything properly and have you also have construction liability insurance, otherwise you just may be setting yourself up for failure.
4 Poor leadership skills
When your team has inexperienced or unmotivated members, you may find they bring the whole team down. Not only that but they also have a way of tarnishing a company’s reputation. It’s the responsibility of the owner to make sure that the employees or subcontractors are properly trained, compensated and actually want to be there.
It’s important to build relationships with the people that are working for you and be sure that lines of communication are kept open. Doing this helps to eliminate reworks and saves the money that would have had to have been spent on them.
5 Running away with it
Of course, owners want their business to grow but doing so too quickly can be damaging. Taking on too many jobs at once is going to end in disaster eventually, as shortcuts begin to creep in as you struggle to keep up.
Instead, take things one step at a time and track your growth so you don’t get too far ahead of yourself.