Starting a new business isn’t easy, and it’s plagued with potential pitfalls. Starting a new construction company is no exception. If you’re getting ready to launch your own construction firm, or if you’ve recently started one up, look over these common mistakes new contractors make. Then, watch out that you’re not making them.
Mistakes New Construction Companies Make
- Not writing a business plan – This isn’t the most exciting part of starting a business, but it’s a necessary one. It will help keep you focused, understand your priorities, and put you on a solid path to success. It’s also important if you want to secure financing for your new company.
- Not creating policies and procedures – One of the biggest mistakes new contractors make is overlooking the important of implementing detailed policies and procedures. And clearly communicating them to all employees. Your firm needs established best practices, safety guidelines, staff rules, and more to guide behavior.
- Not hiring the best people – When you start a new company, you may be eager to hire on friends, family, former coworkers, etc. But if they aren’t the best people for their roles, this will hurt you. Prioritize getting top talent into positions they’re well suited for.
- Not investing in software – There’s so much software available today that will make your life so much easier—and your construction company more profitable. Accounting software, estimating software, and other technology to help with operations is well worth the investment.
- Overbuying construction equipment – You might be eager to deck out your fleet, but don’t forget that bootstrapping is important at first. There are lots of benefits of renting heavy equipment, for example. Be realistic about what you actually need, what you can rent, and what you can afford.
- Not buying the right insurance and bonds – Consult a qualified adviser to ensure you have all the business and construction insurance and license and permit bonds you should have.
- Paying too little attention to contracts – Construction contracts are complicated, and they can make or break profitability on a job. There are so many details laid out in construction contracts, they must be thoroughly read by someone with the legal and industry knowledge to fully understand them. If that’s not you, make sure you have someone who fits the bill.
- Accepting too many jobs – Sure, you’re eager to get some cash flow and a portfolio of completed projects. But if you stretch the company’s resources too thin, it will only hurt you. Mistakes will be made, deadlines will be missed, equipment and crew will be overworked, you may have to buy or hire more than you can afford, and other problems can result. And you end up hurting your brand’s reputation early on.
- Accepting jobs you’re not well qualified for – This is similar to the above. One of the mistakes new contractors make often is taking on projects they don’t have the right experience, expertise, staff, or equipment to execute. Again, it’s likely to lead to mistakes, miscalculations, and other complications. And this too damages your brand.
- Not marketing the company – Many contractors aren’t familiar with marketing, and even assume that it’s not the sort of company that can be effectively marketed. But there are many ways to market a construction company, and it’s a key part of attracting new work to sustain and grow your business.