Owning your own contracting business can bring you a lifetime of joy and fulfillment. However, for many people, this dream can turn into a nightmare as they find their business slowly failing. Like most businesses, about half of all contracting companies will fail within the first five years. If you can make it past that five-year mark, though, your chances for a long and successful company drastically improve. There are many reasons why a contracting business might fail:
Poor financial management
Making and managing a budget is crucial to your success. If you are losing money due to poor financial planning, lack of budgeting skills, or inability to properly estimate and control costs, then your bottom line will quickly shrink and put you in the red. A successful contractor knows more than how to swing a hammer.
Out of Control Growth
Success will grow your business, and that’s a good thing. However, if your business grows quicker than you are able to keep up with, that can cause a lot of problems down the road. A higher demand without a similar increase in available resources can put a strain on your business, leading to a lack of proper equipment, inexperienced, spur-of-the-moment hires who have no training, lower morale among workers who have to share a dwindling supply of resources, and a smaller chance for profit, as more capital must be invested simply to make up for your business’s present shortcomings
3. Poor Management
Inadequate training, apathy, inexperience: these are all factors that can lead to poor management in the office and on the job. Poor management leads to lack of oversight and little to no quality control, which is never good for business. In addition, poor managers lack the basic communication skills which are necessary to supervise employees and talk to clients.
4. Client Complaints
Since your money comes from your clients, it makes sense that you need to do everything reasonable to keep your clients happy. Poor workmanship, missing deadlines, lack of cleanup, or raising the price of a job after it’s begun are all things that can anger a client. This can lead to complaints, demands for refunds or refusals to pay, legal problems, or official complaints. All of this will drastically affect your ability to run a profitable business. Another problem comes from not knowing what to do when a client is unhappy. It’s a good idea to remember this: shouting at your customers will NEVER work out in your favor.
5. Unreliable Supply Chains
No matter how well you run your business, an unreliable supplier can throw your operation right off track. Make sure are dealing with people you trust and have met with face to face. Don’t be afraid to spend a little more to get the right supplies and work with the right people–cheaper is almost never better! Communication is key to helping you anticipate and deal with problems before they become a major issue for you or your client. If there is a problem, the sooner you know, the sooner you can anticipate and adjust as needed. If the client needs to be informed due to a change in the deadline or bottom line, make that communication as soon as possible to avoid issues later on.
6. Incompetent Subcontractors
Even though it can be a good idea at times to hire a subcontractor to help you with a particular aspect of a job or to make the work go quicker, be very cautious. An unqualified or unlicensed hire is never a good idea, and will inevitably cause problems. Make sure you are dealing with people who understand the importance of your schedule and your deadlines. Make sure the subcontractor is working to meet your high standards of excellence, because ultimately is it your name and the name of your business on the contract, and the quality of the work reflects you, regardless of who actually completed it. Don’t be afraid to be demanding.
7. Unpredictable Factors
Some things you just can’t help. A slumping economy, lack of demand, problems in the supply chain, terrible clients–all of these can do serious damage to a contracting business, no matter how well it is doing.
Successful contractors, however, have many things in common. Even though there’s more than one way to achieve success, most long-lasting businesses have a few things in commons, such as:
–Satisfied, well-trained employees who are happy with their jobs, paid well, and feel like they are a valuable member of the company.
–Superb financial management, with budgets clearly managed, low to non-existent debt, and job costs accurately estimated and planned for well in advance
–Excellent management from the top down, with managers who are hands-on, able to anticipate problems, and willing to take responsibility.
–The flexibility and willingness to learn and adapt to advances in technology
–Superior communications skills during every phase of the project, communicating with clients, suppliers, subcontractors, and employees to help ensure a smooth-running project.
While some factors and people are outside of your control, you owe it to yourself, your employees, and your clients to run your business as smoothly and efficiently as possible. Communication skills, financial planning, and effective management techniques are all important items that can help you achieve happiness now, and long-term success in the future.