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Why do Contractors Fail to Build Strong Successful Businesses?

A lot of construction and remodeling contractors start their businesses with big goals. They get started with a few tools and a pick-up truck. They have a dream of growing a stable company that can support them and their family. But as with a lot of new businesses, the honeymoon quickly comes to an end.

 

So why do more than 50% of construction businesses fail in the first five years?

 

  1. They’ve failed to learn about the business behind their trade.

Running a successful construction business requires knowing your trade. It also requires a knowing how to run the business behind the trade. A lack of business skills is a critical mistake that can take a company down.

Effective Leadership in Construction

As you build your construction business, you must build your business skills at the same time. Eventually, your business will grow to a point where you have to move into management and leadership roles. This requires a different set of skills than you had when you began. Building your business skills will help you lead and manage your company better.

From early in my life, I had the great opportunity to watch my Dad and my Pop in the construction business.  My grandfather left playing football in the late 1940’s to get into the roofing industry.  He developed his skills as a roofing contractor working in Philadelphia.  Eventually, he took his trade skills and started his company.

My Dad began working for my grandfather after he met my mom.  He worked on weekends when he came home from college.  Eventually, he decided to leave college and get into the roofing industry. He started his company in 1974.  He continues to lead that same company 42 years later.

My grandfather passed away in 1991 at 61 years old.  When he passed he was unable to leave my grandmother with any savings or income.  His business did not have value beyond what he was able to produce with his hands.

The difference between my Dad’s level of success and my grandfather’s lack of success is clear. It is my Dad’s dedication to learning and growth. My father continues to educate and build himself. He continues to grow his skills in both his trade and the business behind the trade.

He continues to learn about his trade and his business.  This has helped him build a company with over $10 million in annual sales.

Learn about an important aspect of running any business – Business Cash Flow.

 

  1. They fail to create a sales and estimating program for their company.

A large part of running a successful construction business is estimating projects.  Good estimates are needed to win work either through bidding or selling. A company cannot survive without a constant flow of profitable sales through the company.

Construction business owners need to develop a consistent estimating and sales process for their business. Establishing a consistent process will allow the owner to train employees to implement the process so that growth can occur. It also allows owners to track the effectiveness of the process.  They are able make changes as needed if the company begins to slip.

In 2010, I was working with a fellow contractor from South Florida. He was working on bidding several projects for a self-storage facility. His business needed the work. It was important that he  get those projects because he was unsure where he was going to find other work for his crews.

The contracting business is subject to feast or famine cycles. Contractors run out and contract a lot of work.  After that they turn their attention to getting that work done. When that work starts to run out, they frantically look for more work which typically drags their pricing down. They panic and drop the price on their proposals just to get work in the door.

This contractor was stuck in that vicious cycle. The problem was that he was so used to looking at the bids from one angle that he failed to see a new approach to how to price projects.  He did not understand the business behind his trade.

In working with him, I opened a new way of looking at project pricing up to him. He was successful in getting the contracts for the projects valued at over $400,000. He gained valuable insight into the estimating process.

Your ability to provide quality work to your customers – your trade skills – got you into the business.  Implementing a sales and estimating process will allow you to grow your business.

Learn the Basics of Estimating by clicking here and signing up for this course on estimating.

  1. They take on too large a variety of work and don’t focus on a niche market.

Running a successful construction company requires lots of energy, time and resources. Taking on a broad range of work spreads the company owner’s focus too thin. A lack of focus reduces momentum for the business. It leads to multiple problems that can impact the chances for success.

Successful construction company start-ups are those that focus on serving a particular niche.  Serving a particular niche allows a business to maximize the use of their assets – their equipment, their people and the leader’s time.  Some companies that take on too many types of work. They purchase too many pieces of equipment that go unused after a job is done.

When Eric Jurin started out in business, he took on a lot of different types of work from a lot of different sources.  He contracted house painting projects, additions, roofing and siding work.  He would take on different work to get his company started.

But as time went on, he discovered that he was better suited for certain types of work.  As his business grew, he narrowed his focus onto the roofing industry.  He built a solid reputation in the community for delivering high-quality work for both residential and commercial customers.

In 1998, after I joined the company, I looked at further refining our niche. I reviewed our projects and discussed the results with our team. We found out where we were most successful.  In 1998, we decided to trim our niche further to focus on the commercial and industrial roofing industries.

After refining our markets and focusing further on our niche, the company experienced exponential growth within the first year.  Saying no to certain types of work allowed us to grow our business further by enabling us to focus our skills and abilities on exceeding the expectations of our clients in our niche.

Focusing on your niche will allow you to accelerate the growth and increase profit for your business.

Learn about how Construction Blogging can help you find your niche.

Building a successful construction business is hard work – but it shouldn’t be difficult.

Construction is a hard industry.  It requires a strong back and skilled hands in order to be successful.  But success goes beyond just being a skilled tradesman.  A successful construction business owner must also be skilled at the business behind their trade.

Do you rely too much on your skills as a tradesman?  If so, it may be time to change your approach and learn about the business behind your trade. Construct-Ed bring together experts in the construction industry. We can help you take your business to the next level.

I am developing a program for new and existing construction business owners.

 

9 Zones for Launching and Growing Your Construction Business

 

This program will help you build a start a strong construction company or help you make your good construction company better.  Sign up for a free membership and subscription to Construct-Ed and we will notify you when it is ready for release!

Develop your business skills to match your trade skills.  Being good at both will raise your chances for success.

Share your thoughts with me below on how building your business knowledge will help your company succeed.  How will you build your business knowledge to the level where it matches your trade knowledge?

If you received insight from this article, please share it with others in your network!

 

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