The construction industry has a high failure rate early on, it is a true feet to maintain a start up. Many don’t recognize how easy it is to have your business fail. Looking at the statistics and strategies will help give us answers so we can keep our companies in business.
“Between just 2007 and 2009, 31.9 percent of the nation’s 1,424,124 contractors went under, according to BizMiner. There were fewer failures in 2010 and 2011, but a lot of companies still failed. In fact, a great many contractors — mainly small subcontracting firms – fail even when times are flush.”- Source
The graph below shows that only 36.4% of construction companies survive the first five years according to the Census Bureau’s Dynamics Statistics. In fact out of all the sectors in the economy construction has the lowest percentage of success. Being in business for more than five years is a major success.
While the health care industry ranks the highest in survivability rates, construction ranks the lowest.
With the Construction industries unique financial challenges and payment problems, it may be no surprise to see these statistics. The research goes on to show that in many cases the primary cause of the failure was growth issues, which eventually led to:
Inadequate Cost Tracking Systems
Knowing how much your labors and materials cost you is crucial to making profitable estimates and bids. You can be the best builder in the world but still struggle in the business if this step is not done correctly. Accuracy is the key here, the more accurate data you can have on how much your material and labor costs you, the higher chance you will have of making a profit.
Poor Accounting and Cash Flow Management
Inaccurate cost tracking systems eventually lead to accounting mistakes and misuse of cash-flow management. Construction business owners may lose money on a job and try to make up for it on other jobs. When doing estimating for a job it’s recommended to break the project and billing up into phases of the project. This will help with your cash flow management and increase your chance of survivability.
Under Estimating Bids
In a world where the company with the lowest bid often gets the job, it’s important to0 not take jobs you know you will lose money on.
Not having enough or the right insurance coverage
Construction is a high-risk industry, which makes it more expensive to insure than other sectors. When doing estimating for projects you intend to bid on, make sure you are thinking about all of the insurance requirements you will need including, workman’s comp, liability insurance, flood insurance etc…
Controlling some these issues can be difficult because by the time business owners have the information they need to make important decisions it’s too late.
busybusy time tacking solution
busybusy was created by a construction business owner that wanted to solve this problem and reduce the risk of failure for his own business. After looking for tools to help his business become more efficient and not finding any. He decided to build one himself, and this is how busybusy was born.
busybusy was created to give construction professionals information about their business to help them make smart and even more important, profitable, decisions. Our flagship products is an employee time tracker built specifically for the needs of contractors. With it you can:
- Reduce the frustrations of gathering everyone’s time cards and running payroll
- Set up job codes and a budget to track your labor costs in real time
- Understand where your employees are spending most of their time
- Make more accurate bids and labor estimates
- Manage and Control your Labor Growth and overhead better
- Have a better understanding of what kinds of projects your business can or can’t handle.
