Key Reasons Why Construction Companies Fail

Understanding where other companies go wrong is a good way of seeing what your company needs to do (or avoid) in order to succeed. Many businesses in the construction industry fail every day and there are some key reasons for this. It’s a huge shame every time a company shuts down but the prevailing thought is you don’t want yours to be next. Below are some points to keep in mind if you want to ensure success in the future.

Growing Too Fast

Growth is always positive for your company but there is such thing as growing too quickly. Combining the perfect blend of professionalism, prices and presentations can result in companies winning huge series of contracts but then taking on too much work can bring them down to earth very quickly.

Stretching your resources too thinly is extremely dangerous and there is more to business growth than sales. You need to ensure you have the right levels of management experience and working capital to manage the contracts you’re taking on. Fast growth means these are usually not in place and then businesses get carried away with themselves and unfortunately burn out as they spread themselves far too thin. When thinking about bidding for a contract think about the client, think about the list of contractors companies in front of them and whether you’re of the same league. There is no shame in turning down some contracts for the benefit of your business.

Project Management Skills Lacking

Every construction contract needs a huge range of resources needed to complete it. People need to be in the right places at the right times and without the right project management companies fail. The majority of building contractors are specialists in a particular trade and have slowly learned to manage bigger jobs but are lacking in formal management training. If you want to succeed it really does pay to study management or business, even on an informal basis, for the survival of your business.

High Staff Turnover

If you’re unable to retain staff then there will be an inflated cost every time you need to find replacements. Companies need to keep an eye on their staffing levels – there will of course be occasions where you can’t avoid finding new staff but as a rule you should be able to manage your staff in such a way that they don’t leave regularly and are reliable. It’s likely you’ll see your costs head out of control of you do it any other way.

Poor Cash Flow Management

Quality cash flow management is absolutely essential to success in the construction industry. Your workers need to be paid, suppliers need their invoices settling and even if your customer is holding onto their final payment – you need to be able to pay or they never will.

If a construction company runs out of money then work stops completely. Workers won’t turn up and suppliers won’t deliver so construction stops. This is enough to put your clients off for good and there are plenty of other construction firms who want the work.

It’s never fun to look at the negative side of the industry but if you understand that these are the things to avoid then there’s no reason you can’t be a great success.