When you find the opportunity to get involved in construction in an area that is developing, there is a serious potential for profits to be made. Starting a construction business to meet those opportunities can be a very lucrative move. However, whether due to inexperience or just some negligence, it’s easy for new construction companies to hit some major roadblocks that eat into their profits and even put them at existential risk.
Here, we’re going to look at five of the easiest ways to lose money in a fledgling construction business and what you can do to prevent or fix it.
You will lose money if…
… you can’t manage a productive team
Poor productivity has a range of causes. However, a lack of effective leadership and supervision is one of the leading ones. If you’re not using construction team management software and the right supervising team to make sure that the workflow is proceeding as it should be, then it’s all too easy for people to lose motivation and for problems to develop, such as production bottlenecks. Effective management, planning, and logistics are all crucial and require you to invest in a team of effective supervisors and leaders to provide and maintain the project’s direction.
… you don’t manage change orders effectively
Effective monitoring and control of labor in the field are essential. In particular, change order management is a big preventer of tasks taking on more time and require more expenses, including the need for additional overtime hours. The rise in these costs can lead to disputes over invoices, which can be even more costly outside of the project.
… you don’t keep records of how projects are organized and carried out
Construction is one of the most heavily regulated industries due to the capacity for harm that comes with it. As such, make sure that you have in mind all of the building rules and regulations that you need to follow.
Aside from following them, you should ensure that you are writing and storing policies and keeping records of how you follow those regulations. Otherwise, even if you are compliant, you could be at risk of being labeled non-compliant and being fined because you failed to keep the records you need.
… you don’t have the proper health and safety policies in place
Construction sites are more dangerous than the average workplace, but that doesn’t mean you should simply accept that level of danger. Completing a thorough health and safety policy, complete with provisions of personal protective equipment, routine training with tools and machinery, and the right placement of safety signage is all crucial.
Aside from having to pay out workers’ compensation in the event of an accident, you could be liable to hear from a construction accident attorney if you are suspected of being negligent. Not only is this a major financial cost, but it can also greatly affect team morale and motivation too.
… you don’t protect the work site from theft
Theft can happen in varying levels and degrees throughout a construction project. Ensuring effective worksite security is important to prevent direct theft of things like the high-value equipment you keep on-site and materials.
However, you should also be aware of supply chain theft, which can include suppliers invoicing you for materials that aren’t provided or having you pay for materials that aren’t of the quality that they were originally billed as. Good relationships with suppliers are essential, which means keeping an eye out for those who might seek to have you pay more than you should.
… you don’t claim the expenses that you should
Getting to know the tax write-offs that you can claim can help you save a lot of money that you would pay out otherwise. Various costs are accrued during a project that you might be able to claim back, including motor vehicle costs, claiming for tools, equipment, and uniforms, and even claiming on some of your builder admin costs. You might end up paying the taxman a lot more than you should, so working with a construction tax accountant could be an investment worth making.,
Though the examples above aren’t the only common causes of loss when running a construction business, they do count as some of the easiest ways to lose money that you should be aware of. Put the right plans in place, ensuring health and safety are prioritized and don’t underestimate the importance of proper record-keeping.