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5 Reasons Why Construction Companies Fail

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March 31, 2022

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    Although creating a construction company can be pretty lucrative, many construction businesses fail. On the one hand, this is common across all sectors; as many of us know, nearly 20% of companies fail within the first year alone. Therefore, taking the time to learn about the inherent barriers and pitfalls within your industry can make a major difference in how successful your company will become. With that in mind, here is a list of 5 reasons why construction companies fail.

    1. Project Delays

    One of the top reasons construction companies fail is because of project delays. This is because the nature of the construction field is highly unpredictable and rife with accidents and mishaps. Such things can delay projects for days, weeks, months, or even years. These delays can drastically increase costs, which can totally kill your budget. If the delay is disruptive enough, you could lose your company after just one project.

    Specifically, here are the most common causes of construction delays:

    • Communication: One of the top reasons construction companies always fail is that they have poor communication. Companies must have a way to maintain clear, effective communication between the workers, management, and owners. Failing to do so can cause delays and result in injuries, fatalities, and much more.
    • Supply chain issues: Supply chain issues are also another common cause of these delays. This is especially the case since the COVID-19 pandemic. Either way, supply chain issues can disrupt the ability to work and complete the project. To avoid this, you should invest in tools and software that allow you to automate your supply chain management.
    • Poor Risk Management: Failing to properly assess and reduce risks on the construction site can be catastrophic to your business. This is because it can result in serious injuries or even the death of workers. In addition, such things lead to bad press, lawsuits, and other things that can totally tarnish your brand and ability to work and do business in the area. Taking the time to purchase the proper risk assessment tools can help prevent this.
    • Weather: No matter where your construction site is located, the weather is a great neutralizer. It can get too hot, cold, rainy, icy, etc. Taking the time to consider your area’s weather patterns can help you avoid some of these disruptions. On the other hand, you may also want to create a plan that will allow you to quickly return to work once the disruption is over.

    Nevertheless, by improving communication, making plans to overcome disruptions, and finding other ways to be proactive about delays, you can prevent them or at least lessen the amount of time it lasts.

    2. Poor Project Management

    Similarly, another major reason construction companies fail is poor product management. No matter how large or small the project may be, project management is one of the most imperative parts of the process. This is primarily because construction project managers are tasked with keeping projects on track, managing the budget, and more. So, if you have an inexperienced or ineffective project manager, your company is likely to suffer as a result.

    Moreover, many construction companies also fail to purchase the proper tools for managing labor and material costs. This caused them to lose money on every project they were involved in. Purchasing the proper tools is one of the best ways to ensure that your labor and tools are properly managed. However, failing to do so is often to the detriment of the company. Also, many construction companies don’t have a reliable system for tracking and assigning tasks. This can result in projects falling behind or being delegated to hinder progress on the project. Lastly, the majority of construction companies don’t have a way to coordinate the work of subcontractors. Since subcontractors are highly common on construction sites, owners or site managers need to ensure that they have the proper tools to manage them as well.

    3. Cash Flow Problems

    Cash flow is important in all companies. However, this is especially true for construction companies. Construction companies have to be able to pay for a wide array of tools and materials. Moreover, they must be able to pay the workers on time to ensure that they continue work towards the completion of the project. When the cash flow is not being properly managed, there will be times in which you do not have the cash on hand to pay employees, vendors, etc. This can prevent a project from being completed all together.

    4. Internal Disputes

    Another common reason construction companies fail is over internal disputes. When a company is at odds with itself, it’s almost guaranteed to fail. This is partly because disputes can lead to poor communication, which is one of the main causes of project delays. Moreover, these disputes can make it difficult to make major decisions for the company, which, in turn, undermines the company’s ability to function properly.

    5. Poor Planning and Estimation of Resources

    Lastly, poor planning and resource management can be a major cause of a failing construction company. This is because poor planning can cause delays, while poor resource management can result in supply chain issues or can cause a company to unnecessarily waste resources, which can ruin a project budget. However, by finding the proper planning and resource estimation tools, many companies can overcome these issues.

    Need Help Making Your Construction Company Successful?

    Overall, if you are looking for help making your construction company successful, plenty of tools are available. For instance, Hivot is a platform that solves a lot of these problems at once. Simple, powerful, and affordable, investing in Hivot allows you to streamline construction project communication. This makes less room for delays, miscommunication, and poor project management. So, despite the vast number of barriers and pitfalls, using Hivot can be an amazing tool to manage your company successfully.

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