The construction industry is one of the fastest growing but cut-throat industries. And with the massive real estate boom during the pandemic and significant shifts in office work, it’s no surprise that construction companies are reeling to keep up with the demand.
Even in typical markets, the Bureau of Labor Statistics data shows that about 56% percent of new construction companies don’t survive past year three, and nearly 83% don’t make it to year twenty. And that means thousands of families are displaced every year from job income as construction companies fail.
So what should construction companies do to beat these staggering odds?
We’re glad you asked. We’ll cover four top principles that separate the 20% survivors from the 80% failures.
Rolling with Market Changes
The last five years have brought staggering changes to the construction industry for both commercial and residential builders. From an economy ramping up pre-pandemic, halting commercial projects during the WFH movement, to post-pandemic inflation and housing demands, navigating the construction market has never been more challenging.
These recent events have highlighted the impact of available specialized labor and dependence on supply chains for building materials. As a result, not only have labor and materials been in short supply, but the cost of each has increased significantly.
Construction company owners have a much higher chance of beating the odds if they actively study market changes. These include regularly reading market reports, observing the competition, and using innovative methods before significant changes occur.
- Study industry trends to get ahead of the curve with innovations and grab new market share.
- Keep your “eyes up” to proactively adjust before the storm hits rather than recover after being knocked down.
- Don’t let traditions sink you.
That last point is critical in the construction industry. Construction is one of the oldest trades, evolving to protect families and businesses over thousands of years. Unfortunately, because of this impressive history, the construction industry is often resistant to change–resulting in hundreds of thousands of dollars in missed revenue.
Being proactive in market warning signs and implementing the right tech gives construction companies the best odds of overcoming obstacles.
Leveraging Business Processes to Reduce Waste
One of the top challenges for construction companies is managing their cash flow– cash comes in less regularly but is constantly going out. And with insufficient cash flow being a leading reason for business failure, eliminating cash leaks is critical.
- Poor communication resulting in project redos
- Unclear expectations
- Having a disengaged workforce (low productivity)
- Hiring the wrong people
- Mismanaging materials
- Failure to prevent accidents and mistakes
You can massively increase your available cash flow without even raising your sales. You can eliminate cash leaks by tightening your hiring process, improving communication, and creating buy-in from your staff.
- Ensure that all employees on a project have a clear understanding of objectives, deadlines, and expectations.
- Hire people who fit your culture.
- Automate project management.
- Create an empowering culture that makes employees feel ownership of their work to reduce wasted time and materials.
Improving the Sales Journey
It’s an industry tragedy that construction companies do not lean into sales– they see themselves as craftsmen, not salespeople. But the sales journey is the critical door to your revenue flow. Adopting a streamlined and tech-assisted sales journey can take a daunting task and turn it into a simple and sustainable revenue stream.
- Failure to qualify and follow up on leads.
- Focusing on features over benefits.
- Coming off as overly sales-driven rather than promoting human connection.
- Failing to provide proof of value.
Instead of muscling through an intricate part of running your business, create an intentional process incorporating tech to make sales easy and scalable.
- Use visuals, case studies, and client reviews to prove credibility and address concerns.
- Communicate your value proposition through friendly and approachable conversations.
- Use CRM software to automate client profiles, qualify leads, and follow up on conversations effortlessly.
- Study the sales journey, both in construction and other industries. Talk with your leadership, salespeople, and administrative staff about what works and what doesn’t.
Most construction company owners start by being builders themselves. But owners must transition into operational experts to grow sustainably without fizzling out. This includes strategic process creation, intentional innovation, and culture maintenance.
- Failure to create a culture of buy-in with employees leads to a disconnect between “the boss man” and the job site.
- Failure to use tech to streamline project management, sales, and finance.
- Failure to appropriately model risk and taking on the wrong projects for your skillset.
Construction companies can employ many accessible operation management methods to avoid a slow death. While the CEO of any company needs to be proficient in operation management, you can exponentially accelerate the learning curve by partnering with third-party management experts.
- Use automation software for project management to keep all jobs on track with live updates.
- Allow yourself to take a backseat from the job site and focus on managing the company. Hiring trustworthy and culture-aligned employees is critical to allowing you to do this.
- Standardize your project acceptance criteria using modeling software to accurately determine if a project is within your scope, create an accurate estimate, and identify the best projects for your time.
Ready for Growth?
Managing business growth is challenging, especially when you already feel strapped for time and resources. So how do you know which changes will bring the greatest ROI and how many new things to balance at once? That’s where we come in.
Think of us as a third-party partner committed to supporting you from start to finish. That includes discovery, implementing changes, and sticking around to see your business recover. And we’ll still be there in a year or two to help you adapt to new needs and growth!
Contact us at Revalate today for a consultation!