Starting a construction business is always a challenge. There will be a lot of obstacles to overcome and without proper planning and managing, your construction business might fail.
Most construction business owners spend their time in the field working on the business instead of working in the business. They spend more hours trying to finish everything on time. Others take more work than they can handle or opts to work with low-grade clients.
To help you avoid making mistakes in your contracting business, here are the top 7 reasons why construction businesses fail:
1. Starting Weak
Starting a business because it’s cool, trendy, or “there was no other choice” will not take you far. Most construction companies started because the owners inherited it from their parents. Although there are a lot of owners who know what they really want for the business, others do things haphazardly since they think that it’s not their business that they’re going to lose.
TIP: Whatever it is that you’re going to start on, make sure that you’re going to do it wholeheartedly. No half-baking things. If you love what you’re doing, along with the right attitude, running your construction business would be a lot easier.

2. Financial Issues
The worst thing that you could do in your company is to keep putting personal money in to cover your business’ financial needs. It should be the other way around. A lot of contractors miscalculate the capital they need for the business to thrive. Along with a solid plan of action, create a detailed estimation of your daily budget. Don’t start out undercapitalised and end up chasing tails.
Other than starting out with insufficient capital, another mistake contractors usually make is inaccurate quotes. Not taking in the full scope of work can lead to cost overruns which would stress both you and your client.
Another scary scenario is when the client suddenly runs out of money and the construction is stalled. How are you going to pay your subcontractors and the suppliers?
TIP: Create a clear plan that details the expenses and the projected costs so that the client will have an idea if they can afford to go through with the project. Be detailed and honest with your client.
Have a checklist to make sure that you don’t miss anything. Review your orders to the suppliers before placing them, so there are no surprise price changes.
Another tip is, don’t take on D-grade clients. It’s better to have few well-paying clients than having a lot that could barely pay the bills.
3. No Proper Planning
In every business, it’s essential to have a strong strategic business plan. This will help you prevent wasting time and money. Contractors might overlook a lot of things like natural disasters, structural issues, mold or asbestos. Things like these are included in business planning. It’s where you spend the time to take everything in your business and decide what to do with it and how to protect it.
Creating a business plan can be time-consuming. But it pays to have a detailed plan now than to move blindly and ending up losing money down the drain.
TIP: If you haven’t created a business plan yet, build it now. Remember, “Failure to plan is planning to fail.”

4. Poor Time Management Skills
Not being able to follow the schedule on the dot is another problem for contractors. This is usually because of permit delays or any other unforeseen delays. Sometimes, it’s also because of not delegating tasks properly. When you delegate tasks among your team members, you’ll be able to focus on tasks that really need your attention.
TIP: When creating a schedule, include some slack to account for delays that might come up during the construction. Always keep an eye on task deadlines and the completion schedule to make sure that your project finishes on time. Survey the site thoroughly to prepare your team for any delays that might cause the project to run over time and cost you more money.
As a business owner, we have this tendency to do everything ourselves but this doesn’t work. Delegate tasks to whoever does them better.
5. Poor Leadership Skills
When you have unmotivated or inexperienced team members, they almost always can drag the whole team down. They might tarnish your reputation if they won’t be able to do their parts well.It’s your duty as the leader to make sure that your subcontractors or employees are properly trained and compensated and somehow have the same enthusiasm as you do.
TIP: Build relationships with your subcontractors and employees. Make sure that you keep the communication lines open. It’s better to work in a place where you are not belittled by your position and everyone’s contented and happy. When you do this, you’ll eliminate reworks and the extra costs to do them.
Sometimes, you might not be able to work with the same subcontractors. It is important that they have the training and proper licenses needed.

6. Out-of-Control Growth
All business owners want their companies to grow. But growing too quickly can sometimes be dangerous.Most construction companies want to take on every job that comes their way. What usually happens is the quality of service becomes lower or projects get delayed because they’re trying to keep up with everything at once.
TIP: Don’t take in more projects than you can handle. Take one step at a time and track your growth so that it wouldn’t get out of hand.
7. No Marketing
What’s a good service if nobody knows about it? You know that you do offer a great service, but you would not be able to sell if you don’t market it to your target audience.
It’s essential to have a marketing strategy to know who your target market is and why they should they buy from you among the thousands of other construction companies.
Think of how you can make your company a little bit different than the rest. It can be a better turnaround time or better customer service. Just think of what your prospects really want and then you form your marketing strategy to give them just that.
TIP: Start using social media daily and make sure that you engage your audience. It’s the cheapest and easiest way for you to market your business and for your prospects to reach you.
Build a marketing strategy and review it especially when it’s not converting prospects into leads. Don’t be afraid to ask for help from marketing specialists if you need to.
Find your Unique Selling Proposition. You can start by studying your competitors and finding their strength and weaknesses. And then based on those, create a strategy that would give you the upper hand.

This list might be overwhelming, but there’s no need to panic and give up. All businesses, even the big companies, experienced these reasons. What’s important is that now you have the knowledge, it’s time to set up plans, strategies, schedules and systems to make it easier for your construction company.
Take control of your business and try hard to keep it running efficiently. It might not be a smooth ride all the time, but with planning and implementation, your company will have a longer lifespan and higher profitability. And remember to have fun working in your business.
Do you want to talk to one of our business coaches about your construction company? Click here to book in for a quick chat and see how we can help you and your business.