The real reason construction companies fail

27 March, 2020

Poor financial systems This is a big bullet point under the broader topic of capital and financial management. Many construction companies can’t track if they’re making or losing money until the very end of the year. I’ve even seen companies that fail to bill for all or their work because they are so busy completing projects and doing estimates for new projects. Good financial systems are an absolute must so those types of things do not happen. Accounting software can help but won’t solve everything. A good accountant or in-house financial manager may be advisable —one that will provide detailed accounting at least every few months.

Inefficient operations Inefficiency rarely happens in big, easily identifiable chunks. Inefficiency typically impacts that company in 10- or 20-minute increments. A good example is a sevenperson crew standing around on a jobsite waiting for a truck to show up. Over the course of the year, this type of wasted time can add up to the point that all profitability is sacrificed.

Poor customer service A lot of companies do not listen to their customers very well. Companies just focus on completing the work according to the contract. If they get paid, they assume all is good. But remember, construction companies are in the business of serving customers, and that includes good customer service.

Family-run corporations These businesses have an even higher failure rate than the typical company. Family-run businesses have a unique set of challenges that generally hurt future generations more than the current generation. This is a complex issue with many facets to consider.