How to Succeed as a Contractor

Construction is a difficult business that copes with constant and sometimes abrupt changes, and those who are not capable or prepared enough to deal with these demands may eventually fail. BizMiner, an industry research company, estimated that of the 823,830 heavy, highway, building contractors, and specialty trade operating in the year 2000, 233,967 were already out of business by 2002— a 28.4% of failure rate. Thousands of contractors, whether in business for 5 years or for more than 10, face business failure and bankruptcy every year. These companies leave behind incomplete public and private construction projects, and what is worse, they leave millions of dollars in losses to taxpayers and project owners.

Among the main reasons for failure are the changes in line or scope of business, variation in the location and type of work performed, considerable increases in the size of individual projects, and over expansion. Also, many firms have been driven to bankruptcy because of management issues, such as inexperience with new types of work, inadequate training for the personnel, and lack of experience or insufficient number of personnel. There are often cases of inadequate management of costs and projects, estimating and procurement problems, deficient insurance and improper accounting systems.

Another major cause is the changes in ownership or staff. The contractor retires, dies, or sells company, changing the leadership or focus of the firm. Often no ownership or management transition plan exists to ensure continuity in the event of death or disability. Sometimes key personnel leave the company or the staff is not properly trained on the company’s policy and operations.

Finally, there may be other factors important to note such as economic down-turns and inflation, weather delays, poor site conditions or inadequate building plans, lack of skilled labor or other labor difficulties, shortages of equipment and material, inability to pay of the owner, and onerous contract terms.

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