Top Ten Factors running a successful building contractor business


It is not easy to run a construction business. There are many pitfalls and ways to lose money, but if you follow a few basic steps you can not only survive but become very rich. Many successful construction contractors have learned there are certain things you absolutely must do what is right all the time and specific skills you need or get to do it in this very competitive industry. In this article, I will summarize what it takes to be a successful construction contractor to the importance of

important factor :. Hands on experience

Do not even think about starting a construction contracting business unless you have at least five years of savings (which means, in general, not specific) construction experience. The only exception to this is if you intend to specialize in one area and one area only. We call this niche. Niche can be very profitable, but they can also go away, changed or replaced by technology, new products, changes in the industry or societal changes. The best chance for success in the general contracting company to gain experience to do everything. This general experience has many benefits. It gives you the ability to identify and hire competent individuals, fire incompetent ones, appreciate the good work product and identify poor work product. Probably the most important thing it gives you is the ability to transition from being a technician to be a manager. The best experience comes from small and mid-sized construction companies that need to be jack of all trades. Larger companies tend to pigeonhole you into niches. It’s OK if the business is a niche, but if you start general contractor construction company with skills in just a few niche areas, you will not unless you hire a weakness

Second most important factor .: Outstanding Accounting System

If you do not have a sound accounting system construction business will ultimately fail. This CPA has seen this too many times than I care to recount. Sound accounting system allow you to assess whether you make the work of the job itself. To go with your gut instinct is dangerous and fraught with danger. A sound accounting system helps you to find the things you do right on each job and the mistakes you made. Numbers do not lie. Unfortunately, my experience has shown me that most housebuilding pay little attention to their accounting systems. There is a fear that the proper accounting will put the business owner up for higher taxes. Thus, the cash received on the work and the money paid out go unreported in an effort to avoid tax. What a mistake. I do not care how great your gut feeling on every job, if you do not have an accounting of every penny of each job, you can be sure that you are flying blind and losing money on every job. You have to go out of business and family will suffer. If you decide to start your own business you have to act like a professional business owner it means to create a sound accounting system. Failed accounting led to litigation, failure and bankruptcy

The third important factor :. Effective management of

When you have hands on experience in the industry, forged by many years (at least five years) working in all areas of the construction business, you are better able to make the transition from technician to the manager. Effective management requires that you have sound procedures in many areas of your business. Well-defined work product process, accompanied by project-specific checklists, allows you to drill staff on all aspects of project work within. You should have a working product process with accompanying checklists for just about all major projects within the work. This eliminates human error and allows you to make corrections before the project is formally completed. It is the owners of the construction company # 1 management tool. You will develop a process for each job and each project. This process must be written and stored in binders for each job, along with the project checklist. Projects checklist should calendarized. Jobs binders website should include the following:

Tab # 1 – A copy of the signed contract and any change orders.

Tab 2 – The budget for the work. The budget for each change to.

Tab # 3 – Accounting for income and expenses. Income components would include an offer price, money, either deposits or stage of the project is completed and the funds received for change orders.

Tab # 4 – Task List Summary.

Tab # 5 – Projects # 1 Process Summary and Checklist.

Tab # 6 – Project # 2 Process Summary and Checklist.


Last Tab – Customer sign off on the letter completed work along with standard testimonial letter signed by the client, listing the customer’s name and contact information along with permission to use the testimony in marketing and as a reference for potential customers. You must export a copy of each testimonial letter to the special binder that you will take with you every prospect. This testimony binder may be the only thing that separates you from the competition. It provides assurance that the prospects you take customer satisfaction very seriously and can be the difference maker. It makes the prospect a chance to reach out to previous customers to get the references. It also shows the potential business is very organized and well run. Finally, the image of before and after each job in this binder

The fourth most important factor :. Business Partnerships Strong

Stable competent subcontractors who have years of experience working together is critical to the success of the work. Each work is a team effort and a strong network of qualified individuals / companies available for you for each job, and who understand your business processes, will make every job run much more efficiently. Efficiency and competence = profit per job

Fifth important factor :. Project Bidding Process

You can be the most skilled, best managed construction company, with constant talented subcontractors and still go out of business if you do not have a strong process in place to offers for every job. You can lose your shirt if you underbid work. How does this work? The most common cause of dumping is not to do your homework and rely on gut or unverified food rather than fail safe process of checking and double checking every cost within each project. The devil in any construction work is in the details. The bidding process is very much like a business plan for each job. You will find every project, every cost and what the cost will be checked and double checked before bidding the job. Since many construction contractors go wrong to estimate the cost of projects wrong. This false estimates are caused by faulty reasoning tasks and associated costs, as a result of not exactly confirm and again to verify each project and each costs. It is a painstaking process, but you must get the right offers. Your assumptions each project will be vetted not once but at least twice. You know the rule: measure twice cut once. This adage is especially true in the bidding process

Sixth important factor :. Marketing

All construction companies understand the importance of referrals. Most of your potential customers come by recommendation. But the reference is not enough. What should be part of a marketing tool belt?

1. You should have an active website that contains customer stories front and center.

2. You should join the network group.

3. You should join a civic organization.

4. You should provide valuable assistance to local community groups, non-profit (one or two will suffice nicely).

5. You should have regular career jobs bids that are not based Referral

6. You should have a method of direct mail very week.

7. You should have business cards, stationary, workspace labels.

8. You should advertise in the yellow pages or newspaper.

9. Customer Reference Binder (referenced above).

10. You should have brochures

Seventh important factor :. Stay current with technology and renewal of production / Tools

You need to upgrade equipment and tools to stay current with technology changes. This will not only improve efficiency, but also the quality of each job. You will also need to replace old equipment and devices in order to get each job done efficiently and on time. You’ll know when it’s time for new equipment and tools when old equipment and tools begin to break down at a rate that causes repeated delays. When the equipment / tools breakdown it can cause excess runs and lead late completions. No matter how good the quality of your work, missing completion dates will hurt your reputation

Eighth important factor :. Hire Weakness

No matter how much experience you have and how skilled you may be that there are certain things one does well and some we do badly. More often than not, what we do well are the things that we enjoy doing and what we do poorly are things we hate to do. A skilled business owner will hire people who do not have strength in areas of the business owner needs weakness. For example, one of my clients almost went out of business because he did not like having a call to gather requirements. Advise me about him? Hiring someone who is an expert in museums. He took me up on my advice and finally, his collections expert, became his partner. His business is thriving now. Employing the weaknesses and watch your business boom

Ninth important factor :. Document Mistakes and failures

This should be incorporated in the job search process / task Binder. You must learn from your mistakes. Mistakes should not be considered anything other than experience learned. Document those bad experiences and incorporate them into the work process and task list binder so that never repeat them

Tenth important factor :. Change Orders

Most agreements include language about change orders. Change orders are caused by many factors, which are beyond the scope of this article, but let me be clear in saying that you have to cost out all changes in sequence as if you were to cost the job. You will then process the change order (list each task and assign the date of completion for each project) and attach task checklist for each new project as a result of the change order. Finally, you must get the user to understand and sign off on the order or you will not collect the full price for the job. Many construction contractors unfortunately do a poor job in addressing change orders. They are reluctant to shed light on the customer and gloss over it in an effort to avoid confrontation. The reason? Reality change orders are not addressed up front when you are offered the job. Customers only see the price you gave them and it’s in the contract. You must deal with the reality of changing the order in place at the beginning of the bidding process and before the contract is signed. If the client understands from the beginning of change orders do not occur often and change it will increase the price of work, you will be less shy about confronting customers when it occurs.


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