Construction is currently one of the world’s fastest-growing industries. According to one study, the volume of construction output will increase by 85% by 2030, reaching a staggering $15.5 trillion. In other words, the construction industry will account for close to 60% of all global growth.
That’s all great news for a small business just getting started, right? Well, not necessarily.
Here’s the hard truth. Construction is the type of business that requires high investments and costs. Projects take a lot of time, and you need to invest efforts and resources to maintain your equipment, and this is not to mention the fact that the entire industry is extremely competitive, with giant corporations controlling most of the market.
Knowing what to expect before you launch your small business is essential if you want to avoid failure.
Here are seven ways to take charge of the fate of your construction company.
1. Proper Planning
Inadequate planning is perhaps one of the most common reasons for failure and starts with keeping your schedules too tight, not allowing for contingency and not understanding that projects can take longer than initially estimated, as well as cost more.
Problems like under capitalization and a disrupted cash flow are a direct result of bad planning. When you begin a project, make sure to cover everything from financial aspects and marketing to development.
Sure, preparation is time-consuming, and sometimes you are in a hurry and forget about its importance, but if you plunge headfirst into every job and don’t know what your next steps should be, you may most probably be heading for bankruptcy.
2. Unreliable Workers
Take the time to select your human resources with care and diligence. Construction is not only about brick and mortar, but also about people: those who do the work, those who lead them and those for whom you work.
No matter how professional and trusted you are as an owner, if your employees are inexperienced and unmotivated, they can easily harm an otherwise good business. Provide your workers with training opportunities, instill a safety culture, compensate them fairly, and encourage them to share in your passion and enthusiasm for the trade.
3. Don’t Underestimate a Project
“It’s an easy project, we’ve done hundreds like these…”
In truth, every project is different, and failure often results because contractors don’t know how to estimate what they need. As a result, they omit specific permits, miscalculate time and staff needs, or fail to consider changing market conditions. Some issues are avoidable; others are external to your business, and you can’t control them, but it’s always better to overestimate than underestimate.
Regarding capitalization, far too many construction companies don’t evaluate their financial needs correctly. They don’t know how much money they need in the beginning or how much money they need to sustain their small business or what to do if there are delays.
4. Prepare for the Unexpected
While it’s difficult to know with certainty what you’re going to encounter when you start a new project (asbestos, mold, structural flaws, etc.) or what can happen during the construction work, you still need to think about the risks before you break ground. Being prepared for whatever may come your way means having all the necessary tools and specialists on board, having enough money to cover expenses, and having good insurance in case things go awry.
5. Unclear Specifications
Sit down with your clients and explain to them what the work will entail. Communicate openly about their expectations and check to be sure that you are on the same page. Also, ask your clients to be very specific about what they want. They can’t tell you how to do your job, but they can share what they want to get out of it.
6. Factor in Delays
No construction work is safe from delays. As much as you plan for the unexpected, some setbacks are out of your control – changes in legislation, building codes, union regulations, etc. But, most of the time, you can avoid delays through proper planning, such as getting required permits and approvals, observing site regulations, and taking occupational safety measures.
7. Prepare for Financing Issues
One of the biggest nightmares for construction companies is learning that a client has run out of money. To help avoid this issue, make sure that the estimates are as accurate as possible and set a clear payment plan. In that way, a client will know exactly when and what is expected to be paid. Also, try to stick to projects you can manage with the existing resources. Don’t attempt to grow too fast, even if you’ve secured an important project and think you are set for the future. You never know.
You may recognize your small business in the situations described above. If that is the case, there’s no reason to panic. Take a breath and look for advice, then start planning correctly and prepare your business for bad times as well as good ones. What is important is that you’re patient and seek your long-term goals while also adjusting your strategy and taking corrective actions when necessary.