Here’s a quick fact. Nearly 70% of contractors fail in first 7 years of doing business. Studies show that the reason contractor business owners fail is not from a lack of skill, but from a lack of good business management practices. The following “7 deadly sins” include the biggest mistakes contractors make in business.
1. Failure to Plan. Too many contractors go to work just planning the next week, month, or job. In order to grow your business to the level you want, you’re going to need a plan. It doesn’t have to be too complicated, but it needs to hit some basic points about what your business does. Such as:
- What services do you offer?
- Who is your ideal customer?
- How will your business bring value to your customers?
- How much do you charge?
- How will your customers pay you?
- When will your customer pay you?
- How will customers learn about your services?
- How will you get referrals?
- What’s your annual net income goal?
Don’t feel overwhelmed by these questions. Even if you take out a piece of scratch paper and write a 3-4 sentence paragraph for each question, you are off to a great start!
2. Improper Accounting.
Having an accountant who knows the ins-and-outs of the construction industry can make or break your business. In order to make a profit, you have to track your expenses meticulously, budget bids accurately and calculate insurance premiums correctly. Some basics you should be keeping track of include:
- Time card accuracy
- Work accomplished on jobs
- Time spent on different aspects of a project (i.e. framing, drywall, electrical, etc.)
Proper accounting improves the bidding process and increases your ability to get the next job. Transferring that information from the field to the office is also critical. Estimators and accountants are counterproductive if they don’t have accurate information to do their jobs. To find a qualified construction accountant in your area check out CICPAC, they have a directory of accountants that specialize in construction.
3. Getting into Bidding Wars.
How are you creating your bids… shooting from the hip? Are they based on a rough estimate from past jobs?
The ability to accurately bid on a project will determine if your company makes it through the quarter. Avoid the race to the bottom with your competitors and give an accurate bid that you know you can make money on.
Research old jobs to identify the cost of each portion of the job. For example, if you’re an excavator, how much did it cost you to dig a deep trench cost versus a shallow trench?
4. Not Keeping a Steady Flow of Clients.
No customers means no business. Its extremely important to generate new business in order for your construction business to thrive. The construction business relies on referrals. Many contractors don’t even advertise, and survive simply off their reputation and the referrals they get from past clients.
Customers love to know the progress on their construction projects. For some clients it will be their own custom house and for others it will be the commercial building they’re going to build their business empire in.
An easy way to keep customers updated on the progress of their project is to take mobile photos as work is completed, and email them.
5. Making Too Many Mistakes.
You know having to redo work sucks. It is very costly and adds time to the job. Mistakes like this can be avoided with proper communication. How are your crew members getting directions from the office?
Do you have a system that is simple to track and use? Instead of relying on the old form of communication, use a simple task manager. This will keep your employees accountable and you organized.
Task management is key to any well-oiled construction organization, and can mean the difference between profitability and bankruptcy. busybusy has a simple task management system designed to keep everyone on the same page, with all tasks tied to the job they are a part of. It was designed based on world famous productivity authors such as “Getting Things Done” by David Alle.
6. Not being unique.
The most successful companies are always looking for something that makes them stand out. If you’re just another white sheep in a flock of a hundred, you will go unnoticed and your business will suffer. What makes your company different from any other construction company. What makes you the black sheep?
What’s your competitive edge? The most successful companies are always looking for something that makes them stand out.
Write your unique selling point or competitive edge down on a piece of paper.
*Put it somewhere you will see it everyday. *
7. Using Paper Time Cards
It’s rare to have an employee that needs no supervision. When you’re the owner/manager of a project, you can easily clock in all your team members at 8am every morning and clock them out at 5pm every day. While the standard work week is typically 40 hours, the typical employee does not put in 40 hours of work per week.
Here’s an example to put it in perspective:
After every week crew members have to rack their brain to fill out their time cards. More often than not a team member will simply put he was on the job at 8 am. When he really showed up at 8:17. Then when lunch rolls around he puts a 30 minute lunch break on his time card, not remembering the actual time he took for lunch. Then he puts 5:00 pm for clock out time, weather he left at 4:45 or not.
On average this adds up an extra 42 minutes per day of rounding and padding time cards.
15 minutes here and there might seem harmless, but it really adds up.
When you use paper time cards, you are potentially losing up to $200 per month PER EMPLOYEE! If you want to grow then you’ve got to systemize your time cards. You’ve got to use tools that make time cards automatic. This will not only save you thousands of dollars per year, but it will help you get more accurate labor costs for your projects and in turn allow you to bid smarter.
