Docstoc

“Why Contractors Fail” – Ten Pitfalls To Avoid and Ten Ways to

Document Sample
“Why Contractors Fail” – Ten Pitfalls To Avoid and Ten Ways to Powered By Docstoc
					“Why Contractors Fail” –
Ten Pitfalls To Avoid and Ten Ways to Avoid Them

Ten Pitfalls To Avoid

1. Accounting & Financial Management Problems



Inadequate cost tracking systems
Estimating or procurement problems




Underinsured
CPA does not follow guidelines contained in American Institute of CPAs Audit Guide for Construction Contractors

1. Accounting & Financial Management Problems (cont.)


Bank lines of credit constantly borrowed to limit
All credit fully secured Lines not being renewed

 

2. No Comprehensive Business Plan



Contingency plans are not developed
No “road map”




No goals
No objectives

3. Unrealistic Growth/Over Expansion


Expansion in volume, work type, or geography faster than resources allow
Significant increases in the size of individual projects Expands too rapidly to meet staffing and/or working capital requirements





4. Poor Project Management



Inadequate supervision
Inability to get reasonable prices on change orders Projects not being completed on time



5. Poor Estimating and Job Cost Reporting


Revenues and margins decrease over time
Continued operating losses Loss or reduction of bonding capacity

  

Bidding jobs too high or too low

6. Communication Problems
 

Disputes between contractor and owner

Poor communication from field to management

7. Changes in Ownership and/or Personnel


Leadership of company changes (owner dies, retires, sells company; no continuity plan in place when key person dies or becomes disabled)
Key staff leave company (inadequate time to train new staff; need time to teach company policy & operations)



8. Changes in Scope or Line of Business
 

Changes in type of work

Changes in the location of work performed

9. Factors Beyond a Contractor’s Control

  

Unexpected economic down-turn
Weather delays

Labor difficulties
Material & equipment shortages




High inflation
Owner’s inability to pay

10. Loss of Loyal Customers


Decreasing reputation for company’s ability to perform contracts on time & within budget

Ten Ways to Avoid These Pitfalls

Ten Ways to Avoid These Pitfalls (cont.)

1. Develop a Business Plan, including establishing a Succession Plan

Ten Ways to Avoid These Pitfalls (cont.)

2. Identify and hire CPA with construction experience

Ten Ways to Avoid These Pitfalls (cont.)

3. Hire experienced estimator, even if only on a part-time, or “as-needed” basis

Ten Ways to Avoid These Pitfalls (cont.)

4. Develop relationship with surety bond producer prior to requests for bonding

Ten Ways to Avoid These Pitfalls (cont.)

5. Put into place an automated job costing system – e.g., Timberline, etc.

Ten Ways to Avoid These Pitfalls (cont.)

6. Develop banking relationship, including seeking reasonable line of credit

Ten Ways to Avoid These Pitfalls (cont.)

7. Establish clear job descriptions, including fair compensation structure

Ten Ways to Avoid These Pitfalls (cont.)

8. Incorporate supervisory and field training in operations

Ten Ways to Avoid These Pitfalls (cont.)

9. Manage expansion and growth

Ten Ways to Avoid These Pitfalls (cont.)

10. Be visible to customers and perform beyond expectations


				
DOCUMENT INFO
Shared By:
Categories:
Tags:
Stats:
views:12
posted:11/15/2009
language:English
pages:24