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Running a construction business can be incredibly lucrative if you get it right but it’s also a very risky business to get into because the costs are very high. Purchasing all of the materials and equipment that you need requires a large initial investment and a lot of companies struggle to make that money back, so they end up in financial trouble and eventually fail. Usually, this happens as a result of a few common mistakes that business owners make in the early stages of the business. Understanding these reasons for failure is the best way to make sure that you don’t make the same errors when starting your own construction company. These are some of the most common reasons that construction companies fail and what you can do to avoid them.




Buying Too Much Machinery 

If you’re going to take on large construction jobs, you’ll need a lot of expensive machinery. But when you’re first starting out, it’s not always a good idea to purchase all of that machinery yourself. If, for example, you decide to buy a bulldozer because you need one for a job that you’re taking on, where is that money going to come from? Borrowing is the most likely answer and that means you’re going to start out with mountains of debt. It’s better to go with a bulldozer hire company instead for now. Hiring machinery is a lot cheaper and you don’t have to worry about maintenance costs either. It’s best to hire the expensive equipment to start with and then you can start buying once you’ve established a good customer base and you have more regular work coming in. Before you buy anything, consider how often you will need to use it because you don’t want to spend large amounts of money on machinery that you will only use occasionally if you could just hire it instead. 

Lack Of Insurance 

When you’re doing construction work, there is always the chance of mistakes. If you accidentally damage a customer’s property, you’ll be liable for the costs. If somebody is injured on site, there is also the chance that you’ll find yourself on the receiving end of a lawsuit. In these situations, your contractors insurance will cover the costs, as long as you have some that is. Not getting the proper insurance right away is one of the biggest mistakes that you can make. It doesn’t matter how careful you are, accidents can always happen and you need to make sure that you have the proper insurance to cover you if they do. If you have to pay out of your own pocket, it’s likely to sink the business for good. 

Expanding Too Quickly

It’s likely that you’ll start out with smaller residential jobs, you can’t jump straight into big commercial jobs. When you start earning a bit more money and you have regular work, you can start planning for expansion and try to win the bigger contracts. But you have to remember that the material and equipment costs for those jobs will be exceptionally high. A lot of businesses fail because they try to expand too early when they don’t have the capital to pay for it properly, so always make sure that you only try to grow the business when you’re actually ready. 

These are the most likely reasons for failure in the construction industry, so make sure that you don’t make the same mistakes.