Signs of a failing construction company and how to address them
Jerry Aliberti • March 11, 2024
Signs of a failing construction company and how to address them.
Running a construction business can be an exciting journey, full of opportunities and challenges. However, when things take a downturn, it’s essential to act quickly to prevent further damage. By recognizing early warning signs and taking swift action, you can steer your business back toward success.
When evaluating your construction company’s financial health, there are several key red flags to watch for. Below are some major signs of a failing construction company and ways to address them:
Signs of a Failing Construction Company
- Project delays, cancellations, or unfinished work: These issues may point to financial struggles, poor management, or insufficient resources.
- Cash flow problems: If you're consistently struggling to pay suppliers, subcontractors, or employees on time, relying on loans and credit, this is a clear sign of financial instability.
- High employee turnover: Difficulty retaining skilled workers can signal financial distress or dissatisfaction among employees.
- Declining financial performance: Falling revenues, shrinking profit margins, or frequent losses are major indicators that your company is in trouble.
- Lack of bonding or insurance coverage: Failure to maintain proper bonding or insurance may indicate financial instability or poor risk management.
- Legal issues and disputes: Frequent legal disputes, unresolved claims, or penalties could point to mismanagement of contracts or an inability to meet project requirements.
- Quality and safety concerns: Ongoing quality issues or safety violations can suggest poor resource management, lack of training, or inadequate supervision, all of which can damage your reputation and financial health.
- Poor communication and client complaints: Regular complaints about communication breakdowns or subpar work often highlight deeper problems within the company.
- Supplier and subcontractor payment issues: Consistent delays in paying suppliers or subcontractors may strain relationships and cause project disruptions, signaling financial trouble.
- Decreased bonding capacity: A reduction in bonding capacity reflects a lack of confidence from sureties, often due to poor financial performance or instability.
How to Address These Issues
- Project delays and cancellations: Improve project planning and scheduling, allocate resources effectively, and strengthen communication with clients and subcontractors to prevent delays.
- Cash flow problems: Implement robust cash flow management, including accurate budgeting, timely invoicing, and diligent collection efforts. Explore lines of credit or strategic partnerships to ease cash flow strains.
- High employee turnover: Focus on employee satisfaction through competitive pay, growth opportunities, and a positive work environment. Ensure transparency regarding the company’s financial health.
- Declining financial performance: Conduct a thorough financial review to identify areas for improvement. Explore cost-cutting measures, new revenue streams, and revise pricing strategies. Consider consulting a financial expert to enhance profitability.
- Lack of bonding or insurance coverage: Work closely with your insurance brokers and surety companies to address any coverage gaps. Strengthen financial controls and risk management to improve bonding capacity.
- Legal issues and disputes: Invest in better contract management, clear contract terms, and quick resolution of disputes. Engage legal counsel when necessary, and prevent future conflicts with strong documentation and open communication.
- Quality and safety concerns: Prioritize safety training, regular inspections, and quick resolution of quality issues. Foster a culture of safety and high standards across the company.
- Poor communication and client complaints: Enhance communication with clients by offering regular project updates, addressing concerns promptly, and being responsive. Focus on delivering quality work while keeping clients informed.
- Supplier and subcontractor payment issues: Streamline payment processes, negotiate fair terms, and maintain open communication with suppliers and subcontractors. Timely payments and strong relationships can prevent issues.
- Decreased bonding capacity: Work with your surety companies to understand the root cause and address any financial or performance concerns. Strengthen your financial management and project execution to restore bonding confidence.
For more information on how Pro-Accel can help you get back on track, check out Operations Assessment page.
To setup a Free Consultation, email Jerry Aliberti at jerry@pro-accel.com
Remember, these suggestions provide a starting point. Reach out to Pro-Accel today and let’s get on a no-obligation call today and take the first step to achieve the outcomes you want and deserve.
The Challenge One of the most overlooked problems in construction is confusion over who is actually in charge of the project. In smaller companies and on smaller projects, it often falls on the superintendent. They have the field experience, are respected by the crews, and drive the work forward, while the project manager plays a more supporting role. That structure works when the projects are small, but as the company grows and the projects become larger, the cracks start to show. Clients expect the project manager to lead. They want answers on budgets, schedules, and commitments. The word “manager” in the title makes them assume that the person has the authority, and in my years of experience, they should. Meanwhile, the superintendent’s value is in driving the day-to-day in the field and keeping production moving. When the lines between the two are not redefined as a company grows, tension builds. Superintendents who have always “run the job” struggle to let go. Project managers who have always supported now need to step into leadership. The lack of clarity creates a tug of war inside the company.
Welcome to the first edition of The Growth Accelerator. This newsletter is designed for construction owners who are serious about scaling their operations without compromising profit or control. After 22-plus years in the industry, managing hundreds of millions of dollars in projects in the field and leading estimating teams responsible for more than $12 billion in projects, I have seen the patterns that make or break contractors. Each week, I will share insights from the field and boardroom to help you run a stronger, more profitable business. So let’s dive into the first issue topic! I figured I would start with the topic of one of my most viewed LinkedIn posts, which received over 225,000 impressions!
Struggling with large-scale construction budgeting? I can help contractors and developers plan, manage, and optimize budgets for complex projects. Read on...
