After opening a construction business 8 years ago, we have made a ton of business mistakes. There is A LOT of work in opening a construction business and even more work keeping it above water. Most start-up companies will fail. If you’re thinking of starting a construction company I strongly suggest reading my post about how to start a construction company. If you’ve already started a company, keep reading to hear about my mistakes so you don’t make them too.
Not Understanding Your Accounting System
This is HUGE! Even if you hire an accountant and/or bookkeeper, you need to understand what is happening. This is probably one of the scariest business mistakes you can make.
In Canada, you have to pay your GST remittance every 3 months (Jan-Mar is paid April 15, April-June is paid July 15, July-September is paid October 15, and October-December is Paid January 15). Your GST remittance is the GST you collected minus the GST you paid for operation expenses. I strongly recommend every pay cheque you collect that you put the GST collected into a savings account. This way when it comes time to pay the Government you’re okay and have some left over.
You have to pay your payroll remittance every month. This is the money you collected from your employee’s cheques for their EI/CPP/Income taxes. January payroll is to be paid February 15, February payroll is to be paid March 15, and so on. Again, I strongly suggest you put that money into a savings account so you don’t have to stress out when it’s due.
Pay attention to your Payment terms!!!! Make sure your invoices have very clear due dates. My company does 30 day terms. I refuse to do anything higher as in Canada we can lien a site within 60 days. This gives me 30 extra days to chase down a payment before calling my lawyer.
Follow up on late payments. Don’t let that get away from you. Again, if they don’t pay within 60 days, lien the site.
Do Not Put All Your Eggs in One Basket
We have literally made this mistake on repeat!!! And it gets us every time.
We get comfortable with a developer or company and stick with them exclusively. When they run out of work we end up sitting at home. If they go under, we’re running around trying to find new work and sitting at home until we find something. If we have a falling out, we have no work and have to double down on fixing our reputation. Do not stick with one developer or company. Always be looking for new work! Just because you’re loyal doesn’t mean they are. Remind yourself it’s business, nothing personal.
Focus on What You Do Best
What is it you do best? We own a sheet metal company that includes a shop. Another one of our biggest business mistakes is we got hung up on the installing aspect of our trade and left the shop sitting alone. Now we’re back to utilizing the shop as that’s what we do best. Don’t get me wrong, we’re great installers and still install, but the shop is where we shine.
Do what you do best and make it the best that’s offered in your city!
Growing to Big
It is easy to get caught up in the excitement of your dream becoming a reality and rushing to grow it. This was by far our biggest business mistake and it bit us HARD!
Make growth a long-term goal. It needs to be a goal, but push it a few years out. In the meantime focus on your footing. Get a solid crew working for you, and find a few good customers you can rely on. Get your name out with social media and through other trades. Find a good supplier who will give you credit.
Slowly increase your crews and take on more work. Do not rush this. The bigger the company, the more problems you’re going to have and the tighter your cash flow will be.
Employees can be tricky. They can honestly make or break your company single-handedly. and they come in two different types of business mistakes:
You need to treat them right. Some of the things I recommend are:
- Pay them above normal wage
- Have a benefits plan
- Offer RRSP contributions
- Provide Christmas bonus’
- Take them out for lunch from time to time
- Remember their birthdays (seems silly, but it means something)
- Pay for their safety training and their time for doing it.
- Provide safety gear. We provide everything except the boots and we don’t purchase the cheapest items. I would rather pay $2 more for better safety glasses and they’re good, then save $2 and my crew can barely see out of them.
Give them basic respect. When I have to do a first warning, I take the employee out for lunch and ask what’s going on. I let them know they don’t have to tell me specifically and they can say it’s personal, but I’ve noticed *insert issues here* and I’m concerned. This almost always fixes the issue. Employees have entire lives outside of work and those lives can directly affect their work performance.
You also need to watch them. Some of the things I recommend are:
- Monitor their time. If you know doing a job should take 3 days and it takes them 5, ask why. If it happens again, visit the site constantly to see what the issue is. Maybe it’s a more complicated job due another trade, or maybe they’re spending too much time chatting and then packing up early.
- Listen to other trades on how they talk about your employee. I had an employee who I thought was loyal and trustworthy and a great employee. Turned out that when I wasn’t around he was screaming in other guys’ faces and talking badly about myself to whoever would listen.
- Pay attention to their hours. This goes back to monitoring their time thing. I had an employee who would leave the job site at noon every Friday but his timesheet would be for a full day. That was a lot of stolen hours.
- Make sure they are doing things safely! One WCB claim and you’re done.
If you have a crew member who is lazy and doesn’t work as hard as your other crew members, it will bring the morale down drastically. It’s not fair to your crew members or your company to continue allowing that.
If you have any tips or tricks on common business mistakes that can be made, I would love to hear about them in the comments section.