Learner

10 Common Mistakes a Contracting Company Makes

As a contractor, you work in one of the more dangerous industries in business. Construction projects carry a level of risk that requires careful planning and attention to detail to minimize safety issues and costly delays. Preparing for unexpected challenges can ensure the most complicated jobs stay on schedule without any major road bumps along the way. 

However, it's essential to be well aware of the common pitfalls that can arise as a general contractor. While ignoring basic safety measures comes to mind, some mistakes get made in the contract itself, client expectations aren't met, quality of work is subpar, or general operations are a mess. 

Get yourself in the know about what can go wrong while running a contracting company by reading about the top ten mistakes below: 

1. Not Carrying Worker's Compensation Insurance

The biggest mistake any general contracting company can make is not protecting its assets adequately. Your subs, laborers, and other crew members are one of your most important to protect because without them, you couldn't get any work done! 

Worker's compensation insurance is the best way to ensure your assets and employees are protected when workplace injuries occur. For example, if a worker gets struck by a falling object that leaves them with a concussion or possibly paralyzed, the financial fallout of their injuries could devastate your business.

This type of policy covers a wide range of costs in these situations, including:

It's important to have this coverage before you need it, so get a workers comp insurance quote sooner than later. 

2. Being Lax about Safety

Because the construction industry experiences worksite accidents and injuries more than any other industry in the United States, safety should always be your top priority. Contractors that take an inconsistent approach to employee and job site safety generate a rise in projected costs and create preventable disruptions. 

Every time a worker gets hurt, or worse, dies on the job, the entire construction project is at risk. Your safety efforts should begin with ensuring your employees have the best training, equipment, and tools at their disposal. Create a team that oversees compliance and holds regular meetings with workers to discuss risks concerning injury trends that may be developing. 

Safety starts by having the right tools (wearables, interconnected devices, heart rate monitors, etc.) in place and training employees on how to use them.

3. Not Following Accounting Best Practices

With the constant pressure of communicating with clients, approaching investors for more capital, and managing employees and projects, it's easy to get behind on accounting duties. However, failing to keep up with your overhead costs and related expenditures can make achieving financial goals impossible. 

This reality is why you should delegate these duties to experts, like an accountant. They know how to keep your books in order and keep you apprised of any troubling financial trends that could threaten your sustainability. However, if you want to avoid paying for accounting services and are comfortable with the software, consider purchasing a bookkeeping program that can make managing your accounts more organized.

Take your financials seriously to avoid costly issues with creditors and the tax bureau later.

4. Not Being Selective in Your Hiring

There are many moving parts to a construction project, and you're working under tight deadlines as a contractor. It's easy to assume any laborer or sub will do, or you'll just replace them as needed. However, hiring the wrong talent for a job often increases delays and lowers the overall productivity of a construction team. Plus, hiring new employees is expensive in time and training costs. So instead, onboard the best talent for the roles you need to fill. This saves money and ensures your clients get the best project results for their money.

5. Your Projects are Underbudgeted

Project budgeting is an essential skill for a contractor. You have to determine the cost of a project accurately and then create an offer potential clients will accept. It's important that avoid underbudgeting your contracts so that you make a decent profit and have a cushion for when unexpected costs arise.

6. Poor Management Skills

While delegating tasks is innate to the construction industry, as a contractor, you still have to ensure projects get expertly managed. You may be tempted to cut costs to provide an attractive bid by going with cheaply paid subcontractors and laborers, but this can mean more costs later.

Hiring subs with the experience and training to properly manage your construction jobs will ultimately save you money and increase your profit margins. This is because they have the skill set to recognize potential job issues and troubleshoot unexpected hiccups that inevitably pop up during construction.

7. Not Bidding Strategically

For many contractors, landing work involves submitting competitive bids or providing customers with quotes. It's important to have a strategy when putting together your offers. While you may assume the lowest price will always win, the reality is that quoting unrealistically reduced costs will create a project that could cost you more. 

8. Not Maintaining Equipment and Tools  

Construction is hard work, physically and mechanically. Your tools and equipment are some of your most important assets that require as much care as your employees. It's easy to neglect regular maintenance when the stress of a job causes damage all the time. However, failing to conduct preventative care means potentially reinvesting thousands of dollars in tools like a new excavator or bobcat attachment.

9. Not Having a Management Framework

Your contractors are only as good as the management systems they work within. Without checks in place to guide how they should conduct their workload, bottlenecks can arise, quality can diminish, and it will be more difficult to achieve the needed level of client satisfaction in the contract.

Creating a bid process that outlines the elements and factors that should be in every contract helps avoid this situation entirely.

10. Not Taking Customer Feedback Seriously

Another common mistake contracting companies make is not incorporating customer feedback and concerns about a project. While avoiding issues like scope creep is important, some client feedback could bring to light potential project risks that need to be accounted for during the bid process. In addition, avoid surprise quality issues from arising by using your clients as an informational resource.

This could mean additional costs for you later when they demand you make repairs. Always listen to what customers have to say because it could avoid contentious disputes over work quality later.

Final Thoughts

At the end of the day, one of the most costly mistakes contractors make is failing to insure their business properly. Workplace injuries seriously threaten any construction job and those working on it. This is why nearly all U.S. states require companies with one more employees must carry worker's comp coverage to pay for related recovery costs. 

Many contractors are also required to have this policy as part of a bid process. Without it, you will find your work opportunities limited and potentially have to face legal consequences that could result in fines and jail time.