Within the next 5 years, about 80 percent of construction companies may not make it. Here are the top 10 reasons why:
Running a business without a business plan
Businesses will always have risks. These things are completely inevitable. What’s foolish, however, is to run them with no effective planning. A business plan will always be one of the main foundations, and although all of the objectives may not be met, at least you have the plan to compare expectations and realities, make the right adjustment, and lead your business toward the right direction. Remember, when you don’t have a plan, you’ll be running a business aimlessly, and it’s now easy for your competitors to beat you.
Starting a business in purely loans
Creating a construction company isn’t the cheapest business out there. The typical startup cost can run between $50,000 and $100,000, especially if you have plenty of services to offer. The costs cover the equipment, vehicle, labor, registration or business licensing, surety bond, and insurance, to name a few.
Thus, most of the small business owners run to lenders to get a loan, and that’s really a problem. It becomes one, though, if you loan everything you need as the interest will only absorb all your earnings, leaving you with very little cash flow. Before you get into the construction business—or any business, for that matter—make sure that you’ve also saved at least 20 percent of your total startup cost.
Not obtaining any certification
One of the biggest mistakes small construction companies make is to pretend they can get away with running a business with no certification and business license. Sooner rather than later, the government will know what you’re doing, and you can get yourself penalized by the millions or worse be sent to jail. Let’s not forget that issues such as this can ruin your reputation and supersede you no matter how good you are.
Not doing enough marketing
Do you know that almost 90 percent of construction companies are now into social media? Being on Facebook, Twitter, and other social media accounts boost their leads’ awareness. If you haven’t done this yet, then it means you’re falling behind.
Getting into bad contracts
You should never get into any kind of construction work, especially if it covers a huge amount of money, without any kind of contract, which serves as protection for the involved parties. Nevertheless, before you get into any, make sure that you’ve read all the provisions and never sign anything that may put you in a tight situation, such as waiving the right to sue the client for breach of contract or the right to demand payment at the right time.
Not addressing concerns and questions immediately
Customer service ensures that you can maintain the loyalty of your customers and even encourage them to share your business within their network. One of the best ways to do that is to entertain their questions and do something about their concerns as soon as possible. Not paying attention can be easily construed as rejection and lack of professionalism and empathy.
Not upgrading systems and technologies
Not all technologies and systems work, and not all are worth adopting. However, upgrading systems and technologies guarantees that you can do the job more effectively and more quickly. You can be more efficient and productive, and these two things can make clients happy.
Maintaining a bad client
You know you have a bad client when he keeps changing his requirements, when he easily compares you with other contractors, when he likes to bargain for all your services to dirt-cheap prices, and when you are already bullied or harassed. Usually, the most important question to ask when all these happen is, is he worth keeping? Is the amount he pays more than enough to cover for his attitude? The answer to both is no.
Bad clients can take away all your time, put a lot of pressure on you and your business, and may even spell the downfall of everything you worked hard for. If you don’t want to attract bad clients, improve your industry reputation and perform strategic marketing.
Saying yes to all kinds of work
This is especially true among new construction businesses. The market is facing tough competition, so every potential work is considered gold. But here’s the thing with saying yes constantly: you sacrifice your effectiveness, efficiency, and quality of work. Say yes only to those that you can do based on your logistics and capabilities.
Not covering yourself with insurance
Certain construction insurance covers cost of damage to property, accidents involving your employee or client, and even legal proceedings. Simply put, they protect your business from being drained of its financial resources during unfortunate situations.
About the author: This article is written by Anthony who writes on various construction-related topics and works for Construction Companies in NYC.