If you’re feeling the entrepreneurial bug and have been considering starting a general contracting business, it’s important to be prepared for the startup process. The chance to set your own pace, get creative, and expand your potential client base can all be incredibly appealing but there are risks and potential downsides that come with launching any business venture.
Before taking the leap into entrepreneurship as a general contractor, take some time to consider these five pitfalls provided by Royaltakeoffs so you know what to expect down the road.
1. Financial Problems:
One of the most common pitfalls when starting a general contracting business is experiencing financial problems. The cost of a start-up can be considerable, from buying equipment and supplies to hiring employees and renting office space.
It is critical for any business owner to maintain a healthy budget and watch their spending, especially when starting out. Poor money management can lead to cash flow issues and difficulty in meeting overhead costs such as payroll and supplies.
It’s important to plan for these expenses in advance and realistically estimate how much cash flow your business needs to begin operating. Additionally, it’s essential that you have a system in place for tracking expenses and invoicing customers.
Without proper financial management, profits can quickly go down the drain and put your business at risk. Be sure to create a budget and stick to it so you can keep tight control of your finances.
To avoid these issues, it is important to develop and adhere to a budgeting plan for your business from the start. This will help you keep track of your spending and ensure that you are operating within acceptable financial parameters
2. Fast Growth and No Increase in Resources:
Another common pitfall that many new general contracting businesses fall into is trying to grow too fast without a corresponding increase in resources. It’s natural to want to maximize growth, but it’s important not to do so at the expense of resources available for projects.
When your business takes on too much work or expands its services and offerings, you may need to increase staff, equipment, materials, and other resources in order to handle the increased workload.
Make sure you have a plan in place for how you are going to accommodate that growth before taking on any new projects. Avoid trying to take on too much too soon and instead focus on steadily increasing your business over time. This will help ensure that you can successfully manage any increases in demand for your services.
3. Making Poor Contract Bids and Decisions:
Poorly estimated costs can harm profitability in the short term while taking on projects that are beyond your capabilities or resources can have long-term effects on your success. To avoid these problems, make sure to thoroughly research each project before bidding, and only take jobs that you can confidently complete.
Use accurate estimates of costs and factor in any contingencies that may arise during the course of the job. Make sure that your contracts are clear and comprehensive, setting out expectations and obligations upfront, to avoid problems further down the line.
Finally, be honest about your capabilities, don’t overestimate what you can do or underestimate how long it will take and always make sure that you can complete the job to your own high standards. By taking these precautions, you can help ensure the success of your general contracting business.
4. Not Registering Your Business:
The other dangerous pitfall of starting a general contracting business is not registering your business. Doing so can have serious legal consequences, such as exposing yourself to liability for any debts incurred by the business and being unable to open bank accounts or apply for credit lines. Additionally, failing to register may prevent you from taking advantage of certain tax benefits that are available to businesses registered with the state or federal government.
It’s important to understand the specific laws that pertain to registering new businesses in your locality and take steps to properly register before commencing operations. This will help ensure that you are compliant with applicable laws and regulations and provide you with protection from potential lawsuits, tax penalties, and other legal risks associated with running a business without proper registration.
5. Not Hiring the Right People:
It is important to ensure that every employee has the necessary skills and experience needed to do their job correctly and efficiently. In addition, it is essential to hire individuals with strong work ethics in order for your business to be successful.
Employees who are motivated and have excellent communication skills will help your business achieve success. Additionally, having a team of reliable and trustworthy people is key to avoiding any legal or financial issues. It is paramount that you take the time to thoroughly vet each potential employee before hiring them so that you can guarantee their competence and integrity in representing your business.
Running a general contracting business is an incredibly rewarding experience but can also be a source of major frustrations without the proper mindset and knowledge to get started. By avoiding the five pitfalls outlined in this article, you will be well-positioned to set yourself up for success when taking on this exciting venture. Not only should these tips help to protect you from potential pitfalls, but it is also a good idea to seek legal and financial guidance wherever possible.