Running a contracting business is a complex enterprise. You’re a small business owner, faced with all of the challenges that every small business owner faces every day. But you’re also a construction manager who has to deal with the unique demands of a high-risk industry in which small problems can quickly escalate into big, costly delays.
Not every problem is predictable. Nor is every issue something you can control. Nevertheless, being aware of some of the most common risks in your industry can help you keep your contracting business on track.
Risk #1. Injuries
Physical injuries are undoubtedly the greatest hazard in the contracting business. Even on the safest job site, falling debris, slips and falls, electrical accidents and equipment malfunctions injure workers regularly. Even physical exertion and extreme temperatures pose a risk to your employees. According to the Center for Construction Research and Training, about 40 percent of nonfatal construction injuries involve the effects of physical exertion and exposure to heat and cold.
Not every injury is preventable, of course. But adhering closely to OSHA standards can help keep your job sites safe. Employee training is also essential, especially for young, new hires. The Bureau of Labor Statistics says that six out of 10 construction injuries occur within the worker’s first year of employment. Older workers, on the other hand, are hurt less often while on the job.
When accidents do occur, they can impact your workflow a great deal. Even minor injuries can influence productivity if the injured person needs to take time off. Depending on the size of your workforce, it may be hard, if not impossible, to pick up the slack. And if the worker is seriously injured, you could face legal troubles, even if the accident was not your fault.
Bottom line: Protect your workers by closely adhering to OSHA standards, and inspect your job sites regularly for safety hazards that can lead to injuries and even deaths.Then protect yourself against costly lawsuits and regulatory penalties by making sure you have Workers Compensation Insurance and General Liability insurance as well.
Risk # 2. Delays and Missed Deadlines
Every client wants and expects contractors to complete work on time. Yet every contractor knows that a long list of factors can cause unexpected delays. Some of these, of course, are client-driven. When the owner changes the initial design midway through the project, delays are inevitable. Weather, equipment breakdown, and late deliveries of materials are other factors that are pretty much out of your control.
On the other hand, some delays are the result of poor planning on the contractor’s part. Issues such as not pulling needed permits ahead of time, hiring an insufficient number of workers, or failing to schedule utility installation appropriately often result in very avoidable delays. Miscommunication and poor documentation are another source of costly overruns.
Bottom Line: To keep your projects running smoothly, follow these tips from contracting consultant Andrew Morrison, a general contractor with 15 years on the job:
- Set up an office on the job site, and carve out at least one hour per day to review your progress towards goals
- Document everything. Don’t try to manage projects in your head.
- Stay in close contact with vendors and subcontractors to ensure that they’re still on board with original timelines.
- Order materials, utilities and other essentials for the project well in advance.
- Monitor the weather, and create contingency plans for weather-related delays.
Most importantly, if you do run into a significant delay, communicate with the project owner promptly. No one likes surprises. Most people will work with you if you’re honest and upfront.
Risk #3. Downtime
The contracting business is seasonal, unless you’re operating in one of the few parts of the country where it’s warm all year round. Typically, business picks up around March or April, and slows down around the fall equinox. Companies who have government contracts may be slightly less impacted. But cold, wet weather can stall any construction job.
Economic factors also impact a contractor’s workflow. New construction fell off dramatically during the Great Recession and rebounded slowly, leaving many contractors scurrying for work. Nearly a decade later, the construction industry is again robust, thanks in large part to an uptick in private sector growth. According to the Associated General Contractors of America, 39 states added new construction jobs between 2015 and 2016.
Bottom Line: Managing your finances so you’re prepared for inevitable downtime is a major factor in your contracting business’ success. If you’re new to the industry, talk to other contracting professionals to get an idea of how to plan a yearly budget, taking seasonality into account. Then play it safe. Put enough money aside while things are going well to tide you over during predictably slow months. Then add a little extra for unexpected emergencies.
At The Carmoon Group, our priority is helping construction businesses manage risk. With over 20 years in the industry, we have the expertise to build a business insurance program tailored to your needs. Give us a call or contact us online now to set up an appointment for a free consultation. You’ll be glad you did.