nice article by factoring: Reasons why construction companies fail The success or failure of construction businesses is often seen as a measure of national economic health. Recent years have seen many firms in the sector collapse, while there is continual talk of more construction investment being needed, as one way to kick-start the economy. But even in good times, construction companies fail. Here are some of the main problems that undermine them. - Growing too fast Growth is good, but it can happen too quickly. The right blend of professionalism, pricing and presentation can see a company win contract after contract, but with that comes the danger of stretching resources too thinly. There’s more to growing a successful business than sales. It needs the right level of working capital, management expertise and good internal processes. Fast growth can leave these behind, but only for so long, and if they can’t catch up, the business is heading for trouble. - Lack of project management skills Almost all construction projects are complex, requiring a broad range of resources, including people, to be in the right place at the right time. Without the right planning and management, costs can quickly get out of control and delays can build up, as skills and materials aren’t available when they’re needed. Many construction business owners are specialists in a particular trade, who’ve learned to manage jobs of various sizes, but have no formal project management training. While they can get by most of the time, it only takes one project to go badly wrong to seriously damage the health of their company. - High staff turnover Every time an employee or contractor leaves a job before it’s complete, there’s a cost to finding a replacement and getting them working on site. Companies who don’t pay attention to retaining their staff are likely to see their costs spiral, with inevitable impacts on cash flow and profits. - Poor estimating The ability to make accurate informed decisions about likely time scales and costs is essential to success in the construction industry. But it’s not a skill that everyone has, even those who’ve been in the industry for years. Businesses that continue to get it wrong will pick up the cost of their mistakes, undermining their profitability. - Weak cash flow management Excellent cash flow management is key to success in the construction industry. Workers want to be paid every week; suppliers can withhold deliveries if their bills aren’t settled on time, while customers can hold up payments for weeks. A construction firm only has to run out of money for a few days for work to stop, deliveries to dry up and contractors to find opportunities elsewhere. Firms who don’t stay on top of their cash flow all the time run the risk of becoming another business failure. More reasons are : - failure to differentiate from the competition - lack of focus on consistent marketing - being single-source dependent (too many eggs in one basket) - older management team that fails to embrace change - lack of systems
Posted on: Sun, 28 Jul 2013 10:00:15 +0000
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