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Chances Are Your Construction Company is Going to Fail

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How Can You Change the Odds in Your Favor?

According to the US Department of Commerce, 96% of construction companies fail within the first 10 years. This is a higher failure rate than any other kind of business.

If you’re in construction…this is a problem.

Having been in construction for more than 40 years, I understand how hard it can be to build a successful business. It takes a lot more than just knowing construction to be successful. Knowing business is as important as knowing construction.

Over those 40 years, I became aware of the problems and began to understand them. I gathered information and learned how to implement it into my business.

That’s why I beat the odds.

I’ve learned a lot over those forty-plus years and here are 7 reasons that construction companies fail:

  1. Insufficient Cash Flow – Without a positive cash flow, it is hard for construction companies to keep their doors open. A lack of cash flow makes it hard to pay for materials, make payroll, maintain tools, etc.

When cash flow is negative, companies often make hasty decisions or take on jobs that aren’t a good fit for their company. This can result in further profit loss and more cash flow problems.

  1. Unprofitable Projects – A lot of construction companies fail simply because their projects are unprofitable. Guessing at what a project is going to cost to do is not a very good plan. This is why having a proposal system that is consistent and accurate is essential to staying in business.

At Timber Creek Construction using our Proposal system, we consistently come in 25% under budget. This is in before overhead and profit.

  1. Doing Estimates Rather than Proposals – It’s essential to establish clear communication with construction customers. Creating a detailed proposal, rather than just estimating, gives both the construction company and the customer a clear understanding of what will be provided and what they can expect. Following up with a contract is another step to achieving this goal.

There are as many bad customers out there as there are bad contractors. Some of those customers simply want to get the work done for free. They will argue about things that, they claim, were promised. A signed proposal and contract will help to prevent this from happening. 

  1. No Production Payment Plan – Having an accurate and understandable payment schedule with construction customers will set your construction company on the road to success. Not having a payment schedule requires your company to finance the project and consumes your cash flow. You are not a bank.

In my experience, you need to get some money prior to starting a project. This amount will depend on the size and type of project. Then invoice the customer with weekly progress payments that coincide with the percentage of completed work as outlined in the proposal. Customers appreciate a well-documented payment schedule that communicates clearly.

  1. Not Using Change Orders – Unforeseen issues and changes creep into most construction projects of any size. Changes orders are needed when changes are made to the project’s scope of work. When a job change occurs, the construction company should submit a change order to the customer for approval. Waiting until the end of the job to bill for additional costs will be problematic. It will often result in customers being upset, giving bad reviews, and resisting paying.

Customers get excited about the work that is being done until the final bill comes. Then they find themselves over extended and unable to pay.

  1. Poor Customer Service – Most construction companies don’t listen to their customers very well. These companies just focus on completing the work according to the contract. If they get paid, they assume all is good. But remember, construction companies are in the business of serving customers, this includes communicating clearly and consistently.

Most customers will only do a handful of sizable construction projects in their lifetime. Construction companies should remember this and help them build their dream.

  1. Lack of Organization and Processes – Building a sustainable construction business is impossible when the bulk of the business is operating without being organized. To stay in business, you need processes and systems that can be efficiently managed by the people you hire to help you.

For companies that use sticky notes and boxes full of folders, you have a problem. 

Job leads and customer management, project details, task management, communications, schedules, progress tracking, equipment management, the list goes on and on. Each of these elements is extremely time-consuming, error prone, and can negatively affect profitability and cash flow.

You can avoid making the same mistakes most construction companies make by being aware of and understanding these problems. Then implementing and learning processes and systems to ensure that your company succeeds.

This will help you to be in the top 4% of businesses in the construction industry.

Successful construction companies use business tools to build, increase profits, and manage their businesses. Now that you have a clear understanding why construction companies fail, it’s time to make some course corrections.

To help you with this we have a Business Building Toolbox with tools that can help you change the odds in your favor. We also offer training and implementation of these tools into your business if that would be helpful. If you have questions, schedule a free 30-minute construction company consultation.

It’s Really Not That Difficult

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Six Ways to Find the Right Builder for You

When we called a customer to give them production schedule plans for their construction project, they were relieved to hear from us. They hadn’t heard from us since we met to sign paperwork and get their first payment, a few days earlier. They were concerned that we had gotten their money and weren’t coming back.

I read a study once years ago that ranked building contractors below used car salesmen. This is not to say that all used car salesmen are bad, but they have, over the years had a stigma of…shall we say…not being the most honest and trustworthy. For builders to have been ranked below them was very confusing and a little disturbing. I then realized that I viewed customers differently than a lot of builders. For me they aren’t just customers, a project or just a way to earn money. They’re friends. When considering the spending of money to have a construction project done, sometimes a lot of money.

Having a friend who is looking out for you and has your back the best plan?

We’ve all heard the stories of the “storm chasers” that came through town after a storm. They get money for material and then never come back to do the work. What about the guy that was laid off from ‘his job’? He has a pickup, a hammer and a skill saw, heck he can build a deck for his buddies’ cousin. Oh, don’t forget the kid that worked for a contractor for a couple of months and got fired because he wouldn’t show up to work. He’s now an experienced contractor.

As a customer you can find a builder that will help you bring your ideas to life and has your best interests at heart.

To do this you need to know what to look for, so you can find the right builder for you. Here are six things I would recommend when considering which builder, you should hire. –

  1. Word of mouth – This is the best form of advertising. Find someone that you know and trust that has had a building project done. Ask them who they used. What their experience was like. This will give you a view from someone independent of the industry with nothing to gain.
  • References – Don’t be afraid to ask builders for references. This is a good way to find a variation of ‘word of mouth’ and in addition to people that you know. A builder should be able to supply you with 3-5 names of past customers that you can follow up with. If not, you should proceed with extreme caution.
  • Professionalism – The level of professionalism will very between contractors. There is no one specific style or level that should be used in every instance. What you want here is to know that this builder takes what they are doing seriously. You should be concerned if you get a hand-written estimate on a napkin.
  • Experience – This comes with time. Not every qualified builder has years and years of experience, but the more years the more experience. You don’t want to hire that ‘experienced contractor’ I referred to earlier that was fired for not showing up to work.
  • Communication – Even small and simple projects require communication. Of course, the bigger and more complex the project the more important it is to communicate. In today’s world there are all sorts of ways to do this. The specifics of how aren’t as important as the doing it is.
  • Compatibility – This is the bottom line when it comes to determining who to use. Depending on what is important to you, what your focus is for your project. Find a builder that shares those core values. Each and every one of us is different. Take the time to get informed and find the best fit for you.

Too many times I’ve become aware of construction projects going badly, leaving customers feeling abused and abandoned. I have heard too many people say the worst experience of their life was a construction project.

A construction project should be one of the best experiences of life, not one of the worst.

I Love A Good Challenge

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And Building A Dog Playground Sure Is That

 

Challenging and abnormal projects must run in my family. I’ve written about the grain bin house we plan to build for my niece Hannah.

Avoid Feeling Like a Sardine in a Tiny House

How to Determine If Someone’s Trash Can Be Your Treasure

How to Dream Big in A Small Space

How Do You Make Your Dream Become A Reality?

The Next Chapter in “The Saga of the Grain-Bin Home”

 

Now her Mom, my sister Ann, has once again joined the out of the box project roster.


Ann owns and operates Prairie Paws Lodging, a pet boarding facility. When we built her building originally in 2016, we took into consideration future expansion. We currently are working on the first phase of this expansion. As per an earlier post the original ideas have changed. Rather than adding on to the existing building we are going to set individual private cottages made by Pinecraft. 


Part of this expansion project includes doubling the size of the existing dog run. This involves landscaping it with artificial turf and installing dog amenities…I’m talking fun stuff like a pool with a fountain, a tunnel, a hill and a rope attached to a flexible pole.


When we built the original facility, we looked for a way to make cleaning up after dogs easy while maintaining a natural look and feel. We accomplished this by installing artificial turf over an elevated bed of gravel bordered by used railroad ties. This allows for liquid to run through and solids to be cleaned up.


 

Due to the existing run being natural grass and in a naturally low area, it would get muddy in rainy spells. So, when considering the design for the expanded run, it was decided that we would give it the same artificial grass treatment as well as some new fun things for exercising and entertaining dogs.


The project consists of building a 2100 square foot raised pad. The construction consists of railroad ties around the perimeter in rows spaced 12’ apart. In between the ties will be a 4” thick layer of fill sand covered with a 3” layer of ¾” gravel. The gravel and sand will be compacted with a vibrating packer to minimize future settling of the sand/gravel fill. Artificial turf will be spread over the gravel and attached to the ties. The existing fence will need to be removed and reinstalled along with some additional fence. The existing steel pipe framed cover will need to be moved for the building of the raised pad and then moved back to its original location.


In one corner of the run there will be a small paw shaped pool with a fountain. This will require figuring out the best way to get the water from the pool to the pump and to the fountain. In the future there will be an old fire hydrant serving as the fountain, so this needs to be allowed for now.

 


The most challenging part is building the tunnel/hill. We needed to determine what we were going to use for this. We considered pipes, barrels, tanks with the ends cut out and a few other things. Then we found some concrete culverts and the price was right, so this is what we decided on.

 


With Ann having a commitment for the week of June 17th she had no dogs scheduled to be boarded. This provides a good opportunity to work on the project with minimal disruption to the normal boarding routine. With the challenges of this project it may take longer than a week, check back next week to see.


Check back next week to see a day by day progress of the project, the challenges faced and see how the finished project turns out.

How to Solve A Difficult Building Problem?

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With Out of The Box Solutions, That’s How

I have been presented with another building project puzzle. What do you know, it’s from another family member and reminiscent of last week’s post. Do you think they have it in for me…or maybe they just know that I’m good at finding solutions? In reality every construction project deals with these or similar questions.

My sister Ann owns and operates Prairie Paws Lodging, a pet retreat. Her service is in such demand that she has been considering expanding. Timber Creek Construction built her existing building three years ago and we’ve been discussing options for expansion over the last year. After some consideration we’ve decided to build separate private pet cottages rather than adding on to the existing building.

Prairie Paws Lodging

A few days ago, she called and asked if I could have one of these cottages built and ready in three weeks. After a gasp, I said, let me give it some thought. At this point we haven’t determined a floor plan, dimensions, materials, construction method, etc. (Why would I agree to even consider this when I’m already so busy? Because I love finding solutions and helping people with their dreams, that’s why.) It’s not like we weren’t already working on plans to enlarge the outdoor run and converting it to a dog playground. (More on this in a future post.)

Since we talked, this project and its questions have been bouncing around in my head.

The main questions that need answered?

  • What is the floor plan/design going to be?
  • What is the size/dimensions?
  • What building materials? (it needs to be water & dog urine resistant)
  • Price, what’s it going to cost?
  • How is it going to be heated and cooled (a requirement by the state)
  • Where will it be located, in relation to the rest of the facility? Will this have any bearing on the construction, size, etc.?

I called Ann and asked her to send me pictures, links to websites or any other ideas that she had. I got on line and began researching different building materials that would serve our needs. And the solution building process began.

What is the floor plan/design going to be?

  • We started with a couple of design ideas that she found on web sites. This gave me a good visual idea of what she wants. The first was Dog Kennels built by Lone Star Structures. The second was EZ-Fit Dog Kennel from Pinecraft. Both of these structures are nice looking and would work great in someone’s back yard for their own pet. Not so much in an application where different dogs will be using them, and a clean environment is important. Both have exposed wood framing and would not work well for regular cleaning. Beyond that the basic design is what we’re after.

What is the size/dimensions?

  • These two buildings varied in their dimensions. Ann and I discussed what she needed and what size would fill those needs best. She wants these cottages to be larger than the size of her existing pens. After some discussion we decided on an 8’ x 6’ enclosed portion and an 8’ x 8’ open covered area. This was determined by a combination of things; sized to meet minimum needs and be most functional, material dimensions (least amount of waste), price (bigger costs more), appearance (needs to be well constructed and look nice).

What building materials?

  • This is where things begin to get more difficult, because there are a lot of options. We know wood isn’t the best choice for wet conditions. What are the options other than wood? What can we do to protect wood if it is used? One thing we are looking at is a polypropylene slat flooring made by Double L Group. We are settling on a combination of products to keep construction from becoming complicated, meet the budget and provide the look we’re after. We’ll go into more detail in a later post.

Price, what’s it going to cost?

  • This is always a question, as it should be. The real question that should be asked, what’s it worth? Is this expense going to generate enough revenue to be justified? If it’s more than my budget, where can we reduce the cost? We’re early enough in the process that we don’t have this question fully answered yet, but we will keep thinking outside the box to get to the budget number.

How is it going to be heated and cooled?

  • HVAC is typically an expensive part of construction projects. In this case though, we are dealing with a small space, less than 400 cubic feet. They make some inexpensive single room units that look like a window AC and can be mounted in a window or through the wall. In this project the through the wall application would probably be the best option. It would let us mount it higher which would get it further from the dogs.

Where will the building be located, in relation to the rest of the facility? Will this have any bearing on the construction, size, etc.?

  • At this point we have a pretty good idea of where it will be located. For this to be determined we will need to consider how the new building will connect with the existing pens as well as new ones? What will the daily routine be when it’s being used? If more cottages are built in the future where would they go?

This is a lot to be considered for such a small project, but for the most part the considerations are the same regardless of the size. The fact that it’s small and what it’s going to be used for, does create some special considerations.

The one thing that we haven’t discussed yet, and maybe the most important, is if I have the time needed to do this project. This question can’t be answered by anyone but me. This question is one of the hardest questions that people in the construction business ever answer. Most of the people in this business that I know want to help people build their dreams. (This is a topic for another post.)

I will finish compiling figures, working on design specifics, determining the best options for material and if I have time to get the project completed on schedule over the next few days. If we’re going to be able to do this the questions need to be answered by the first of next week.

Keep watching for project updates in future posts.

The Need for A Production Coordinator

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And the Difficult Process of Finding One

This process is difficult because I’ve UN-intentionally made it this way. I’ve discussed this problem in a couple of previous posts; Delegating – The Thing I Suck at Most of All and Sharing the Shovels. I know that if I’m going to ever reach the full level of my intended purpose, I’m going to need help. I can’t do it all by myself.

If my purpose is to help more people find better solutions, then I need a team.

So, if I’m responsible for this situation, then it’s up to me to do something about it. Because I dread the process of finding help, I’ve historically taken the path of least resistance. Find someone willing to say yes and put them to work. This path seems okay in the beginning…later not so much. It’s like cutting corners in anything, the short-term gain is not worth the long-term cost.

I realized that I wouldn’t accept mediocrity in construction, so why would it be okay in building a team.

Our production schedule at Timber Creek Construction is increasing and this means the need for help is too. Working through this difficult process in my mind, I realized I needed to spend some time up front determining specifics of the position prior to filling it. When building anything it’s best to have a clear plan before the construction starts.

What is it exactly that I need this person to do? Are they going to manage, supervise or coordinate? Maybe they’ll just assist. Then there are individual construction projects or the overall production process. There are small, yet significant differences in these things. I need to be clear on what the best plan is.

After a lot of consideration, I determined that a PRODUCTION COORDINATOR is what is currently needed.

What exactly is a production coordinator you ask?

For Timber Creek Construction, a production coordinator is –

A person who will organize and oversee the production and operation of multiple construction projects in order to maintain production schedules, complete projects within budget and achieve the quality of workmanship expected.

This person will need to have these skills and abilities:

  • Sufficient construction knowledge and experience
  • Computer skills including Microsoft Office (Outlook, Word, Excel, etc.) and Microsoft OneNote
  • Written Communication
  • Verbal Communication
  • Reporting
  • Organization
  • Analyzing Information
  • Professionalism
  • Problem Solving
  • Supply Management
  • Inventory Control
  • Valid Driver’s License
  • Reliable vehicle

Compensation for this position will be based upon a percentage of projects being coordinated including some mileage when using their own vehicle. It is a self-employed independent contractor position.

Now if I can just find the right person for this position.

Timber Creek Construction is actively looking for someone to fill this position now. Currently it will be part time with flexible hours and days, potentially becoming full time.

If you or someone you know is interested in helping our customers build their dreams, contact us in the comments below.