Construction is not a simple business. Mistakes can easily be made and often area, leading projects to become unprofitable and teams to close entirely. Fortunately for you, what can go wrong already has and there are plenty of examples to learn from. You just have to be willing to look for them. Here, we’re going to look at some of the more common controversies in the building, marketing, organization, and strategizing of the construction industry and what you can do to avoid them.
Most businesses are going to look for sources of funding and applying for a business loan is always going to be one of the most common. Loans for construction businesses, in particular, can be high, and very tempting. However, you shouldn’t rely solely on borrowing to start your business. Raise cash in other ways first to minimise how large a loan you have to take. In construction, you profit from project to project and being weighed down by a loan that you have to pay off now, next month, and the month beyond can drastically reduce the profitability of your first few projects. You might even have to get a bridging loan once you’ve paid off the initial one just to stay operational.
Not getting certified
Of course, you might not get a loan, or any business at all, if you haven’t applied for the right certification as well as a business license. A lot of smaller teams and construction contractors will think that they can skirt the law by offering work without the appropriate certification. First of all, most smart customers are going to avoid your services like the plague because they know that there’s no accountability there. Otherwise, you have to consider the fact that, sooner or later, you’re most likely going to get caught. It’s a cost to get your certification and business license, but it’s a lot costlier to pay the fines involved in getting caught.
Not spending enough time on estimates
Estimates are where you profit. They help you figure out the costs of a project and how profitable it’s going to be depending on your client’s budget. However, a lot of new construction crews and contractors look at estimates in a different light. They think of them solely as a marketing tool and offer the lowest ones possible. In the end, they might win the bid (they won’t with smarter customers) but they are going to meet a lot of concern and anger when it turns out that estimate wasn’t accurate. Don’t risk the damage to your brand caused by sowing mistrust, use estimating software to provide the most accurate bids possible.
Buying all your equipment
The costs of a project are going to depend on your overheads, too, and by far some of the most expensive overheads are going to be down to the equipment you use. Beyond the initial purchase price, maintenance, upkeep, and repairs are going to keep their running costs high. Which is why you shouldn’t always buy equipment outright. If there’s equipment you are likely to use less often, then lease them so you don’t have to keep up with the ongoing costs that are still there even when you’re not using them. Are you always going to use the exact same kind of earthmoving equipment for each job? Or will your needs differ from time to time. Some projects might require bigger equipment, others might not. Leasing over buying allows you to be more flexible in which equipment at which sizes you use.
Taking on jobs outside your area
When you’re looking to find the profit necessary to grow, you might be working hard to acquire any lead possible. However, you need to no when to say “no” to a project. Specifically, if you have a specialization or a niche and the project is way outside your realm of expertise, don’t assume you can learn it on the job or solely from subcontractors you might use. You can get some experience by providing your skills to larger crews as a subcontractor yourself but taking on someone’s project as your learning opportunity is rarely going to end well. You’re a lot more prone to mistakes and mismanagement which can jeopardize your future in the industry.
Not spending enough time on proposals
Your estimate isn’t always going to be the only tool you use to apply for a job. When making a bid in competition with other construction crews, your proposal is going to be the primary tool you use to do it. You need to spend time crafting every individual proposal, so you avoid some of the most common mistakes. Qualifications and competency might sound like they are the end-all and be-all, but they are not what the client or customer is looking for. They are looking to find out not why you’re a great construction crew or contractor. They are looking to find out why you are the right one for them. Focus on the specifics of the project you’re applying for, not just why you’re so great.
Only using contractors
It’s been a worrying trend for some time now that construction companies will only use contractors on the short-term, often hiring the same ones time and time again, as opposed to hiring them permanently. Using contracted workers does have some advantages. It’s a cost-effective way to employ someone with skills that you don’t regularly rely on. If you want to build a real team, however, you need to use direct hires from time to time. For one, if you fail to hire someone with the specialized skills you need most often, you can lose your best workers to your competitors when they do hire them internally. But it also gives you the chance to train more builders in the specific skills you need and to track quality control over a longer period of time. If you keep hiring and relying on strangers, you are eventually going to hire the one that could cost you big time.
Treating health and safety like a chore
Compliance should not be the only thing you’re aiming for when it comes to health and safety. Regulations can feel very burdensome from time to time, we all know it. However, at the end of the day, there is nothing that can disrupt your bottom line, team morale and reputation like an accident. Invest in health and safety training for your team, hire or appoint a safety officer and treat it as an investment, not a chore.
Not having an accountant
Take the same super cautious approach to your money, as well. Any construction business owner needs to be cost-savvy, there’s no doubt about that. But you are not going to have the financial expertise of an accountant unless you get that training yourself. They offer a lot more than a closer eye on costs. They can be invaluable advisors helping you shape the future of your business by highlighting potential financial risks and opportunities you might otherwise risk. They are also essential when it comes to staying compliant with the recordkeeping and taxes. Treat accountants like the health and safety officers of your money. It costs a lot more to not have one than to have one.
Doing it all by hand
When running a business, you’re not able to get as hands-on with the project as you might like, on average. Accounting, HR, payroll, marketing, communication, project management, there is a lot to oversee. Admin can pile up to the point that it takes your entire workday, keeping you away from the most productive actions that make you the most money. But most of it is essential. So, you need to work on streamlining your admin. There are a lot of ways to do it, such as relegating and improving time management. But the most valuable method is to start automating more of it. Automation not only improves productivity, it also decreases the risk of human error. You still have to oversee automated software, but it takes a lot less effort than doing it yourself.
Growing too fast
Some of the past points covered fall into this, but you shouldn’t focus on growing as soon as possible. Growth isn’t a net positive. It also includes scaling up costs like employees, equipment, and marketing. If you grow before you have the adequate funding, your budget can disappear entirely and if you can’t use your newfound scale to meet your much higher costs, you can sink the business by growing. Again, don’t try to grow into new areas of expertise before you’re ready, too. Take it easy, and plan your efforts to scale step by step rather than trying to do it on the fly.
There is a lot of room for error in construction and the consequences of those errors can be higher than in any other industry. However, it is also one of the most potentially profitable industries available for those with the right skills, so if you avoid the controversies mentioned above, you’re a lot more likely to succeed.