Things to avoid when starting a small construction business
It is easy to start but challenging and tough to maintain if you are starting a new small construction company. In this article, we will mainly focus on trades contractors, specialty contractors and carpentry. Looking at general contractors is a completely different topic as these kinds of businesses need a lot of money and involvement of investor funds.
How it starts
Usually small construction companies are founded by someone who has already worked as a site manager, project manager, carpenter, or something else in the construction industry. They have know-how about some specific scope or job and usually know how things can be improved in their field. They already have an idea of their potential clients, or maybe they even have their first project. However, despite their experience, new construction companies can still make mistakes.
No.1 : Cash flow issue
Typically, when you start your construction company, you will have some projects ready to go, if not, don’t start. If you start the company without any cash, which serves as a safety cushion, you need to agree with your client on a payment plan that covers your expenses. When starting a new company, owners often mismanage setup costs or can’t agree on better payment terms with material suppliers because banks and insurance companies don’t trust them yet. Before starting a new project, check how much it would cost to set it up: instruments, transport, insurance, and so on. And also, don’t forget to agree on payment terms with material suppliers before agreeing on a payment plan with your client.
No.2 : Promising too much
When you are working for the first time with your clients, you want to maintain relationships with them. You start to work on site and find some changes that would cost you maybe one or two days of your work. You go to the client, explain the situation, and say, “I can do it on my own dime.” Later, you can make too many of those promises, and you can end up breaking your budget and schedule. As a result, your client is not satisfied with your provided result. Instead, if you have some changes, go to your client and ask for a time extension and an extra budget, and suggest that we discuss these costs or the schedule once again when the work is finished. Then, on the final settlement, you can decide whether you want to make your client happy by giving them a bargain.
No.3 : Staff problems
Usually, small construction companies are started by someone who knows what he is planning to do and has in mind a team that can help perform the work. Also, with the first projects, the owners are in control of all processes within the company as they are personally involved in everything, so there usually aren’t many staff issues. However, staff problems start to appear as soon as the owner takes on too many projects that are ongoing at the same time. It is best if you start with one project, create your team, find the best leader who can mirror you on the site, and only then add additional projects, knowing that your leader can take care of another project.
No.4 : Poor planning and not tracking progress
When you start your company, you have to be everything, know everything, and listen to everything. Basically, you have to multitask, and staying organized is challenging. Schedules are created in spreadsheets or MS Project; hours are written on spreadsheets and sometimes on paper slips. If projects start to go in the wrong direction, things can get really messy, really quickly. You can start to lose focus; you start to miss material deliveries, not realizing how much time your team would need to finish the project. And what about the construction project budget? Forget about the budget; your project is derailed, and you will know how much money has been lost only by the end of the project (in the ‘best case’ scenario). To prevent these planning and tracking issues, choose construction software that is easy to use and helps you get organized and stay on track.
How do construction software programs help with project planning?
It is proven that in order to survive your first projects, go strong with the next one, and start increasing sales and count of projects, you will have to use construction software. Construction software like PlanUpPro is designed and developed by experienced construction project managers, and tested in series of projects by managers and field workers. You probably know that it is hard to adopt new technologies, and that is why PlanUpPro is designed to be easy to use and very intuitive. PlanUpPro will help you forecast your project schedule and budget. It will give you valuable information about how many resources you need to finish tasks and when you will finish them. All of that is calculated by software, which re-schedules and finds the best possible solution for you.
Starting a new construction company is an exciting undertaking. But it also comes with responsibility. When you start your first project, check your cash flow against unexpected payments, don’t take on too many projects without having a wingman, and use construction software, for example, PlanUpPro, to do your scheduling, budgeting, and more.