The construction industry comes with some inherent risks but there are a few things, that when left unchecked, can put you out of business. Here are a few of the top things that can be very risky to your business.
Growing Too Slow
The construction industry has cycles of growth and decline. If economic growth is on the horizon, and you're not putting things in place (ahead of time) to take advantage off that growth, you will miss the cycle. You need to have time set aside for strategic planning and future pacing. You must invest in the future of your business.
Growing Too Fast
If you are growing for the sake of growing but haven't invested in systems, processes and training your team, you may end up in a situation where the wheels come off the cart. This can result in a poor customer experience, employee and owner burnout, and loss of profits. Plan first then work the plan!
Giving Your Time Away
I talk with builders, remodelers and business owners all the time and one of the most common weaknesses we uncover is unbillable time. You need to find a way to make all of your time billable. If you are providing a professional level of service to your clients, from pre-construction through to job close out, you should be getting compensated for that time. If not, you are simply giving your time away and leaving money on the table.
Something Bad Happens To You
What if something happens to you and you get removed from the business? Can the business run without you? No one wants to think about this scenario but this can be the difference between disaster or freedom in your business. If your business can't run without you then it has little to no value. It can't be sold and it won't be able to produce income for your family or your employees when you are gone.
Reactive Instead of Proactive Accounting
Reviewing reports from Quickbooks or other accounting platforms has its place but it is generally a tool for looking into the past. You can't change what happened last quarter. What you need to have is a tool for looking forward. What is your revenue and expenses for the next 30 days, 60 days, 12 months, etc? Is your revenue pipeline sufficient to cover your overhead costs? What will your profit margins be going forward? This information is critical to know before you make large purchases or new hires. Remove emotion from accounting decisions.
Lack of Details or Specifications In Your Agreements
It should go without saying that you need to have clear details and complete information included in all of your agreements in order to remove confusion and misunderstanding. In todays environment of rising prices and supply chain constraints you need to have language that addresses these issues and how you will deal with sudden or unexpected changes. Simply adding an escalation clause is not enough. It may actually open you up to liability. Consult with an attorney that focuses on construction law for the the best approach based on the type of agreements you use. What works for a fixed cost approach may not work for a cost plus agreement.
Of course there are many other things that can add risk to your business but if you can put systems and processes in place that address the items above you will be well on your way to running a very risk averse business.
I am passionate about helping fellow builders and remodelers create the business they've always wanted. If there is something about your business you would like to discuss or share with me please let me know.