As a contractor, you’re always looking for ways to reduce your losses and protect your business. Unfortunately, there are many risks you face that can cost you money. In this blog post, we’re going to focus on the six most common ways contractors lose money. By understanding these risks and taking steps to protect yourself, you can minimize the losses your business experiences.
Loss Through Construction Defects
The first way contractors lose money is through construction defects. These can include anything from poor workmanship to using the wrong materials. If construction defects are not fixed properly, they can lead to water damage, structural problems, and even safety hazards. To protect yourself from construction defects, make sure you hire a qualified subcontractors, and ensure they are use quality materials in their construction.
Construction Site Accidents
Whether it’s an employee getting injured on the job or a contractor damaging someone else’s property, accidents can be costly. To reduce your risk of accidents, make sure you have proper insurance in place and use safety equipment, and make sure you and the crew are well-versed on safe practices. OSHA and unions typically offer training on a regular schedule, and may be covered in your dues. It’s well-worth investigating to prevent an injury or material loss due to a preventable accident.
Job Site Theft
Contractors can lose money through theft. This can include everything from tools to construction materials. To protect yourself from theft, make sure you have a secure storage area for your tools and materials, and always keep an eye on them while they are exposed. When you’re not on site, secure the tools and material as much as possible, and deter theft by installing a construction security fence, and potentially windscreen and/or barbed wire depending on how high-risk the job site location is.
You spend 12+ hours on the job site, scheduling and managing subcontractors, and managing the relationship with the customer, and it can be easy to be so fried at the end of the billing period that you didn’t account for material changes or cost increases, or scope creep in the project, and end up billing the customers incorrectly. This can include charging too much or not billing for all the hours worked. To avoid this, make sure you have a good billing system in place and always track the hours you work; whether it’s an electronic system or a quick daily log in the truck—keep copious records.
Whether it’s crunch time and you don’t have adequate time to go through each detail and have a certain level of “winging it”, or you are trimming your margins tight in order to win the contract by being the lowest bid. Errors might also include underestimating how long a project will take or any specialists required to complete the project, such as remediation services or working with utilities companies on new construction or substantial rebuilds. To avoid this, make sure you research each job thoroughly and price your services accordingly.
Unpaid By Customers
Finally, contractors can lose money when they don’t get paid. This can include customers not paying their bills or insurance companies denying claims. To avoid this, make sure you always have a signed contract with your clients and follow up on any unpaid invoices immediately. Dealing with insurance companies can be quite challenging, and it’s recommended to get the sign-off from an adjuster on the estimate before getting yourself to a point where the work and material exceeds the currently-approved limit.