9 Mistakes Contractors Make When Growing Their Business
At Bonding Solutions, we work hard to provide clients with surety bonds and insurance necessary to run their business successfully. We also want to help construction companies grow their business while avoiding common pitfalls with accounting, employees, insurance, and management. This article is meant to inform contractors on the most common mistakes contractors make when growing their business, so they can avoid issues and ensure success at every step.
According to the U.S. Bureau of Labor Statistics, approximately 20% of new businesses fail during the first two years, and 45% to 65% of them during the first five to ten years. It’s devastating data that may drive contractors away from opening new businesses and prevent them from growing over time. However, the fear of mistakes shouldn’t affect your desire to open and grow your business. It’s only important to recognize that mistakes are a part of every line of occupation and learn how to avoid them. To help you keep your construction projects safe, productive, and profitable, consider these 9 mistakes contractors make when growing their business.
1. Neglecting the Importance of Having a Good Business Plan
If you aim for successful business growth, you should invest your time and efforts in a well-developed and stable construction business plan. Behind every prosperous construction company stands a long-term strategy that determines future goals and steps in the financing, management, staff, and other areas. This strategy is built through careful planning, where companies make a general outline of their business and plan steps for successful future operation.
A business plan allows you to see the full potential of your company. When you determine general steps you need to take to achieve the set goals, you leave less room for mistakes. Most business plans contain an overview of products and services, a market analysis (including information about target customers and industry in general), annual goals, and information about the organization and finances. All of this data enables companies to operate with more stability.
Because your business will change and grow over time, your construction plan will also change to reflect new needs and goals. The business plan is not set in stone. Although you should craft it with the future in mind and follow the set up strategies, you should also make sure to adjust your goals depending on market changes. This flexibility will allow you to operate your business successfully and help you make important decisions based on reliable data.
2. Inadequate Financial Preparation
One of the most common mistakes contractors make is inadequate financial preparation. Contractors often neglect the need to plan how much capital they need to grow their business and keep it running. The result is often devastating, leaving contractors without enough means to achieve their goals and leading businesses into debt.
To avoid such problems, make sure to prepare financial projections for your new or growing business. The responsible thing to do would be to make a one-year plan and then expand or change it as needed. With a quality startup plan, you can secure your finances and investments and work with more stability.
When you estimate jobs properly, you can make desired bids and win more jobs. The accurate prediction of costs allows contractors to finish future projects with more efficiency. Therefore, obtain good communication among the estimators, project managers, and accountants, so you can get accurate financial plans and run your business profitably.
3. Failure to Modernize the Process
To avoid common mistakes at the construction site, start thinking about modernizing your business. Investing in new technology might seem like a huge step, but it’s well worth the money and effort. Modern technology allows you to handle higher volumes of work and be more efficient in every project. Without it, you might not be able to compete with companies that already provide outstanding flexibility and efficiency due to the use of new technology.
4. Poor Hiring and Slow Firing
Poor hiring and slow firing are some of the mistakes struggling contractors make. Companies tend to rush the hiring process and hesitate to fire incompetent employees, which can leave them with unqualified staff that can increase the risk of claims and lowers the company’s efficiency. If you want to avoid that from happening to you, insist on a thorough hiring process. Guide your HR management toward hiring the best candidate for each particular position, which will increase your ability to have a reliable and qualified team.
Of course, don’t miss to value your employees and create a comfortable working environment for them. Happy employees get more work done and improve the overall efficiency and profitability of the business. Therefore, make sure to offer stable compensation for each one of your employees and schedule regular interviews to evaluate their satisfaction with the job.
5. Not Considering Effects of Growth on Bonding and Insurance
This is the area we excel in and can help you the most! Your surety program depends on many factors, including the working capital, net worth, debt, bank credit, and cost of your current project. Now, all these factors are determined weeks or months before the bond is requested, which means your growing business can exceed the surety’s underwriting guidelines.
You should talk with your surety agent regularly and keep him or her updated on all the changes in the business. Don’t hide your business growth because surety agents can help you protect yourself from claims and other issues that can come from uncovered bonds. Instead, regulate the cash flow and monitor it over time to comply with each bond’s regulation.
Don’t forget to review insurance policies as well. They should be up to date and cover all the new projects, so you don’t face unexpected expenses along the way. Also, full-coverage insurance will show your customers how reliable you are and make them more confident about working with you.
For any further information about bonds and insurance for growing business, don’t hesitate to contact us.
6. Giving Priority to Daily Crises Over Long-Term Planning
Long-term planning is what makes a successful contractor. Many people get lost in the daily tasks and duties, spending all their time and efforts to resolve momentary issues. That can lead contractors to neglect the importance of long-term plans and find themselves unable to reach goals they once set up.
To avoid this from happening to you and ensure successful business operation, always plan ahead. Prepare for both bad and good situations in the future. Set yourself for success but also be prepared to face difficulties.
We recommend you anticipate future costs and goals and set up realistic expectations. Prepare yourself to handle a higher volume of work, so you can be equally efficient in all situations that emerge on the market. Pay attention to issues that may arise in the future, and not only the ones you have currently. Take new projects carefully, craft realistic financial projections, make smart investments, and base all your decisions on careful planning.
7. Ignoring Marketing and Outside Help
Never underestimate the power of marketing. One of the main mistakes contractors make when growing their business is overseeing the marketing potential. In modern times, investing in advertising and marketing is everything. A good marketing strategy can help a business grow just as much as a bad or non-existing one makes it fail.
Gather up an experienced and capable marketing team and make sure to use the potential of the internet. For example, you can target specific audiences with ads on social media platforms or develop your own pages to reach new customers. The possibilities of online marketing are endless, you only need to explore them and find the one that suits you the best.
We also recommend you surround yourself with professionals who understand the business. While you can do a lot on your own, you shouldn’t avoid help from the outside. The right people will give you a new insight and help you grow your business and avoid failures.
8. Choosing Bad Jobs and Signing Wrong Contracts
Many contractors get caught up in the thrill of the business growth and allow themselves to forget about the strict rules they once set. It’s a common contractor mistake that can do a lot of harm to the company. When you don’t think things through and do something on a whim, you risk getting a bad project. Sometimes, people even get jobs they can’t handle, and they end up facing extreme financial consequences.
No matter how much your business grows over time, you should still make time to review every contract and new project you have. As your business grows, the number of these contracts will increase, but it’s still imperative to go through all of them. Failure to read or understand contracts can lead to claims harmful to the business and its reputation.
Therefore, invest your time in reviewing new projects and contracts to avoid construction mistakes. Once you get familiar with each particular job, you can easily decide between the good and bad ones, and pick only the projects suitable for your business. With such a strategy, you will operate your company stress-free and ensure great results in the long term.
9. Targeting the Wrong Audience
Last but not least, take some time to understand the market and target customers. It’s not enough to just go out there and start building. You need to know your clients and customers well, so you can respond to their needs in the best possible way. A deep understanding of the market will help you grow faster and lead customers right to your business.
We recommend you rely on market analysis and target larger audiences. Building for small groups is counterproductive and may lead to financial losses. Recognize the full potential of your products and services and offer them to the right people. Further on, invest your time and efforts to build stable and long-lasting relationships, as these will be beneficial for your business in the long run.
These 9 mistakes constructors make when growing their business should help you manage your company easier and with more success. If you follow our basic guidelines, you can grow your business without the fear of making mistakes that led most contractors to failure. Remember, it’s all about careful planning and thinking about the future.
9 Mistakes Contractors Make When Growing Their Business
Don’t fall victim of these 9 mistakes that contractors make when growing their business. When it comes to getting bonded, we are the team to contact. If you need any help and consulting about your construction bonds, Bonding Solution is there for you. Contact us today or apply online to find a perfect construction bond for your company and prevent mistakes when growing your business.