The Biggest reasons why construction professionals fail.

1. ““WWhhyy CCoonnttrraaccttoorrss FFaaiill”” ––
TTeenn PPiittffaallllss TToo AAvvooiidd
aanndd TTeenn WWaayyss ttoo AAvvooiidd
TThheemm

2. TTeenn PPiittffaallllss TToo AAvvooiidd

3. 11.. AAccccoouunnttiinngg && FFiinnaanncciiaall
MMaannaaggeemmeenntt PPrroobblleemmss
Inadequate cost tracking systems
Estimating or procurement problems
Underinsured
CPA does not follow guidelines
contained in American Institute of CPAs
Audit Guide for Construction
Contractors

4. 11.. AAccccoouunnttiinngg && FFiinnaanncciiaall
MMaannaaggeemmeenntt PPrroobblleemmss ((ccoonntt..))
Bank lines of credit constantly borrowed
to limit
All credit fully secured
Lines not being renewed

5. 22.. NNoo CCoommpprreehheennssiivvee
BBuussiinneessss PPllaann
Contingency plans are not developed
No “road map”
No goals
No objectives

6. 33.. UUnnrreeaalliissttiicc GGrroowwtthh/OOvveerr
EExxppaannssiioonn
Expansion in volume, work type, or
geography faster than resources allow
Significant increases in the size of
individual projects
Expands too rapidly to meet staffing
and/or working capital requirements

7. 44.. PPoooorr PPrroojjeecctt MMaannaaggeemmeenntt
Inadequate supervision
Inability to get reasonable prices on
change orders
Projects not being completed on time

8. 55.. PPoooorr EEssttiimmaattiinngg aanndd JJoobb
CCoosstt RReeppoorrttiinngg
Revenues and margins decrease over
time
Continued operating losses
Loss or reduction of bonding capacity
Bidding jobs too high or too low

9. 66.. CCoommmmuunniiccaattiioonn PPrroobblleemmss
Disputes between contractor and owner
Poor communication from field to
management

10. 77.. CChhaannggeess iinn OOwwnneerrsshhiipp
aanndd//oorr PPeerrssoonnnneell
Leadership of company changes
(owner dies, retires, sells company; no
continuity plan in place when key
person dies or becomes disabled)
Key staff leave company (inadequate
time to train new staff; need time to
teach company policy & operations)

11. 88.. CChhaannggeess iinn SSccooppee oorr LLiinnee
ooff BBuussiinneessss
Changes in type of work
Changes in the location of work
performed

12. 99.. FFaaccttoorrss BBeeyyoonndd aa
CCoonnttrraaccttoorr’’ss CCoonnttrrooll
Unexpected economic down-turn
Weather delays
Labor difficulties
Material & equipment shortages
High inflation
Owner’s inability to pay

13. 1100.. LLoossss ooff LLooyyaall CCuussttoommeerrss
Decreasing reputation for company’s
ability to perform contracts on time &
within budget

14. TTeenn WWaayyss ttoo AAvvooiidd
TThheessee PPiittffaallllss

15. TTeenn WWaayyss ttoo AAvvooiidd TThheessee PPiittffaallllss
((ccoonntt..))
1. Develop a Business Plan,
including establishing a
Succession Plan

16. TTeenn WWaayyss ttoo AAvvooiidd TThheessee PPiittffaallllss
((ccoonntt..))
2. Identify and hire CPA with
construction experience

17. TTeenn WWaayyss ttoo AAvvooiidd TThheessee PPiittffaallllss
((ccoonntt..))
3. Hire experienced estimator,
even if only on a part-time,
or “as-needed” basis

18. TTeenn WWaayyss ttoo AAvvooiidd TThheessee PPiittffaallllss
((ccoonntt..))
4. Develop relationship with
surety bond producer prior
to requests for bonding

19. TTeenn WWaayyss ttoo AAvvooiidd TThheessee PPiittffaallllss
((ccoonntt..))
5. Put into place an automated
job costing system – e.g.,
Timberline, etc.

20. TTeenn WWaayyss ttoo AAvvooiidd TThheessee PPiittffaallllss
((ccoonntt..))
6. Develop banking relationship,
including seeking reasonable
line of credit

21. TTeenn WWaayyss ttoo AAvvooiidd TThheessee PPiittffaallllss
((ccoonntt..))
7. Establish clear job
descriptions, including fair
compensation structure

22. TTeenn WWaayyss ttoo AAvvooiidd TThheessee PPiittffaallllss
((ccoonntt..))
8. Incorporate supervisory
and field training in
operations

23. TTeenn WWaayyss ttoo AAvvooiidd TThheessee PPiittffaallllss
((ccoonntt..))
9. Manage expansion and
growth

24. TTeenn WWaayyss ttoo AAvvooiidd TThheessee PPiittffaallllss
((ccoonntt..))
10. Be visible to customers
and perform beyond
expectations