The construction industry is large and lucrative. If you have some experience working in construction, there’s little wonder why you want to set up your own firm. Although running a construction company can have a lot of great rewards, it’s certainly not easy. Many hopeful entrepreneurs make huge, damaging mistakes when they start their construction businesses. Some of these bring the whole venture to the ground. Here are some of the big ones to avoid.
First of all, jumping in without a business plan. Every business, in the construction sector or otherwise, will have risks. While you can’t fully eliminate these, drafting a good business plan can help a lot. Consider what you want your business to achieve, and how long you want to take to get there. Then, divide these long-term goals into shorter, more measurable ones. In all likelihood, you won’t be able to reach all of these as and when you’ve planned them. However, if you keep these in mind, you’ll find it easy to steer your business around a range of pitfalls. As that old saying goes; “if you fail to plan, you’re planning to fail.”
Another major mistake is relying too much on business loans. As I’m sure you’re aware, setting up a construction company isn’t cheap. Your start-up costs alone will rack up tens if not hundreds of thousands of dollars. The figure will get higher with the amount of different services you offer. From materials to labour to mixer and excavator hire, there’ll be no end to your business expenses. Naturally, you’ll want to go with loans. These aren’t inherently bad, but if you lean on them too much the interest can rack up faster than you could imagine. If you can, try to put aside a lot of money prior to starting your business. About 20% of your total start-up costs should do it. At the very least, browse a number of different lenders and look for the best loan available.
Picking up bad contracts is another major mistake made by construction firms. You should never take a job, regardless of how much it will pay, if the contract could come back to bite you. With every project you take, make sure to go through the contract meticulously. It should protect your client should you fail to carry out the work as specified, obviously. However, it should also prevent them from making any big, last-minute changes. I know, reading through contracts is a sure -fire way to numb the brain. However, if you don’t read and understand all the provisions, you could end up losing your business before it’s properly started. To make sure you’re absolutely safe, hire a legal team to help with drawing up contracts. This will give you a safety net against a range of costly hiccups.
Be sure to avoid these mistakes, and your construction company will get off to a great start. Making it in such a tough industry isn’t simple. However, once you’ve established yourself with a few good clients, the rest is down-hill.