Starting a general contractor business can be both exciting and challenging. The construction industry offers many opportunities, but it also comes with significant risks. Whether you’re experienced or just starting your journey in the general contractor business, your growth depends not only on the quality of your work but also on how you manage your business.
Even seasoned professionals in the industry can fall into common pitfalls when managing their business. In this article, we’ll explore the 5 most common general contractor business mistakes you should avoid to maintain a competitive edge and set yourself apart from others.
You Don’t Have To Know Everything
Most of the general contractors are experts in managing and streamlining the business operations of any construction company. They are not experts in the other aspects of the construction project, which are also important, such as marketing, sales, advertising, negotiations, etc.
Having a profound knowledge of construction techniques, building codes, weather combination strategies, bid submission, recruitment, and contractor selection is one thing. However, operating and ensuring the right navigation of the project lies on the other end of the stratum.
If you look at the high-notch entrepreneurs and business owners in the world, they are not experts in their business field themselves. They have built systems of project management and delegated tasks to the best of their ability.
If they are successful using these techniques, why can’t you follow these steps?
Here are the five most common traps general contractors fall into, and they do more harm than good to them.
1. Contractors Are Losing an Average of $400k per Month in Sales
They are losing that much money by not bidding on jobs.
Bidding on numerous jobs can be very time-consuming. Most of the general contractors overlook this crucial aspect as they don’t have enough time left out of their jam-packed schedules to focus more on marketing and sales. They also miss the opportunity of winning more jobs when they don’t bid on more jobs.
If you are a one-person army and handling everything on your own, you should be bidding no less than 20 jobs per month. Plus, if it’s an established construction company, it should land more jobs than that.
Suppose you are winning 10% of the jobs per month, so if you are bidding on 20% of jobs monthly, this is going to win you two projects per month theoretically.
Unfortunately, the reality is very different. The general contractors are so immersed in the hectic routines of their project schedules and supervising the site work and various other aspects that they don’t have the energy and time left to bid on more projects. Here, the GCs can grapple with their burden by hiring an in-house estimator or an estimating firm.
Both have their own pros and cons. An in-house estimator is well aware of your company’s construction and budget requirements. So, he prepares an estimate according to these specifications.
However, an in-house estimator can be very expensive as you need to offer him office space and all the equipment to work with. Furthermore, you also need to equip him with cutting-edge software to create an accurate estimate. This expenditure is not going to serve you in the long run.
On the other end, if you hire an estimating firm on a project basis, this will save you from the huge cost blow to your company. However, you wouldn’t get this much personalization as compared to an in-house estimator.
The decision is yours, and you can choose whatever you feel is suitable for your construction company. But the smart way is to delegate the tasks as much as you can.
2. You Actually Lose Money When You’re on Your Own
When we have discussed the one common mistake that causes the general contractors to lose $400K monthly, and that is not bidding on more jobs. Now, let’s focus on what is happening on the construction site.
In our consultation sessions with our construction clients, we recommend they spend 80% of their time meeting new clients, bidding on more jobs, and building professional relationships with other contractors who are going to serve them in the long run. The rest 20% should be spent on supervising the business operation from the top.
It works just like an engine that attracts leads, wins more jobs, and then starts to work. The supervisor at the top aligns the business smoothly.
Every construction company should have the following:
- Project Management Team- leads the teamwork to ensure the timely and successful completion of the project
- Field Supervision Team- which oversees the staff and all kinds of work on the construction site, whether it’s engineering, plumbing, excavation, or something else
- Accounting Team- who is responsible for managing the cash flow of the project and performing all the cash transactions
- Purchasing Team- who seeks out the right vendors and suppliers to get the quality products to be used in the project at negotiable and cheap prices
Sometimes, one person can handle all these tasks, while at other times, one person is right to perform a single job. This is how you decide.
After bidding on more jobs, delegating the field tasks, and estimating, let’s focus on the next common mistake.
3. Your Business Stops Growing When You Don’t Offer Revenue
Revenue is essential for a business. To keep your business running, you need revenue, which comes from sales. Sales come from leads. So, where can you find your leads?
Some contractors depend on word-of-mouth, while others believe their long experience helps them. However, if you don’t have a steady flow of leads, your business can stagnate
Getting leads is simple. If you are a commercial contractor, consider signing up for lead-generation services like:
- iSqft
- Building Connected
- The Blue Book
These services connect you with many local opportunities that you might not know about, and they are affordable. You can expect to pay about $75 to $150 a month.
If you are a residential contractor, we suggest signing up for Home Advisor. This service helps you connect directly with homeowners looking for your specific services. You pay an annual membership fee of $200 and then pay for each lead you receive, which can range from $40 to $90.
You might like this too: Home Builder Business Plan
4. You Lose Bids and Don’t Get the Job When You Don’t Follow Up
Clients usually hire people they know. If a potential client isn’t aware of you or your company, they will likely use your bid to negotiate better prices with your competitors. You can have a strong lead generation system and submit many bids, but if the potential client is unfamiliar with you, it’s hard to achieve your goals.
When you bid for someone you know well, you can adjust your price based on their feedback, which can help you win the project. Here’s a simple way to build long-term relationships:
Search on Google Maps for potential clients. Type in “Type of client” + city, “Type of client” + zip code, or “Type of client” + near me. Google will show you a list of leads. Click on each result and save the contact information.
Make a list of about 20 potential clients. Then plan to visit 5-10 of them. You can do this in one day or spread it out over the week. If you’re short on time, consider outsourcing your estimating to free up some of your schedule.
5. You Miss Out on Hungry Clients When You’re Not Online
Every business needs a website. It’s essential. A website allows clients to research your company, see what you do, and review your past projects. It helps them get a feel for your business.
Put yourself in your client’s shoes. If you were spending thousands of dollars on a project, wouldn’t you want to make sure you are investing wisely? Having a professional website can effectively promote your business even when you’re not actively selling.
Most professional website creation agencies charge around $1,000 for a website. However, you can find good website creators on freelance sites like Fiverr and Upwork for lower prices. Just remember that often, you get what you pay for.
We believe that every contractor should use Google Ads. Many potential clients search for quality contractors on Google, and you want to connect with them.
Clients who are researching companies on Google are ready to start working. You can create a landing page and use Google Ads to drive traffic to your site. After this, you can use Facebook to retarget those clients, showcasing your expertise and showing that you are the right person for the job.
Conclusion
Starting a contracting business can be challenging, and even seasoned contractors can make mistakes. This list outlines five common general contractor business mistakes that many they face. We hope it helps you and your company avoid them.
If you need assistance with estimating projects, attracting more leads, or consulting for your construction business, feel free to call us or visit our website at Total Scope Estimating.
