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    Construction Company Failure Root Causes

    Posted by Randal DeHart on Tue, Jun 18, 2013


    The Contractor Paradigm

    We offer the following list of root causes for the extremely high rate of construction company failure which has accelerated beginning in 2009 and continuing as of June, 2013 when this article was written.

    Please read objectively and assess your strengths and weaknesses in each area. You will be a better contractor for it. We do not ask you to change who you are but rather encourage you to do what you do best and outsource the rest.

    Some of you will experience a paradigm shift which is something deep inside yourself recognizing there may be another way to do something you are already doing. Others will experience nothing. Whatever is in your best interest will occur.

    Three Steps To A Paradigm Shift:

    #1 Unfreeze - Being open to a new idea that is in agreement with your core values

    #2 Change State - Arriving at a new understanding about something. Education is the foundation for shifting paradigm. In ancient Greece, Socrates argued that education was about drawing out what was already within the student. "I cannot teach anybody anything; I can only make them think."

    #3 Refreeze - Closing the portals of your mind for now.

    fast easy accounting 206 361 3950 contractors bookkeeping services paradigm shift image

    The only real difference between the success and failure is the answers. "If you know the answers the questions will not bother you" - Randalism

    After reading through this we invite you to contact Sharie and set an appointment to chat with her. You will not have to spend any money; you do not have to be a client. However you do have to own or be in the process of getting ready to start a contracting company.

    She will spend some time at NO CHARGE and perhaps you will get a mere scrap of information that could help turn your construction company around. We sincerely care about all contractors and want to do our part to help and support you. She can be reached at 206-361-3950 or

    The list below comes from working with hundreds of construction companies for over thirty years. This is not academic, it is real world experience and I trust you find some value in it. I apologize in advance if anyone is offended by the direct nature of the statements below. Please accept them in the Spirit of friendship, respect and honor as I intend them.

    Construction Company Failure Root Causes

    1. Working for customers instead of clients and not charging enough (The 80-20 Rule)

    2. Not using Additional Work Orders or Change Orders (Click For FREE Change Order Template)

    3. Cash flow issues kill contractors even though they have profit

    4. Changes in their operations due to contingencies beyond their control

    5. Contractors are subject matter experts in a few areas then believe they know everything

    6. Sales tax liens against contractors twenty two times higher than any other business

    7. Poor document management results in overpaying taxes

    8. Poor scheduling affects production and cash flow

    9. Management skills are learned in the school of hard knocks

    10. Lack of understanding of Construction Psychology

    11. Creatures of habit performing the same mental scripts getting the same bad results

    12. Contractors assimilate pictures faster and easier than numbers and words

    13. General distrust of their Board of Advisors until it is too late

    14. Generally not able to construct BPM Strategy Tools to help them in decision-making

    15. Generally do not plan from back (end goals) to front (current operations)

    16. Look at financial data as time allows and in a historical context only, no forecasting

    17. Operate in the manner that is their organic, natural instinct (it feels right)

    18. Predominantly not financial managers and do not understand the value of outsourcing

    19. Work primarily IN the business but not ON the business

    20. Spend a good deal of time “putting out the same fires” over and over

    21. Value production over planning

    22. Want to work less and earn more money but not willing to learn how

    23. Burn out is high after the tenth year of owning and operating a construction company

    24. They would like problems solved for them without spending time or money

    25. They want instant understanding, instant answers and instant results

    26. Time and money are the commodities that are in the shortest supply

    27. Work-In-Progress (WIP) report the ultimate gauge for cash flow and least understood

    28. Working on stuff you are not skilled in by trying to save money

    29. Ignoring Profit Centers and Key Performance Indicators (KPI)

    30. Attending the business round table at the local bar which leads to Intellectual Incest

    31. Contractors don’t plan, they recover

    32. Do you have lots of “Squeaky Wheels” and do you carry a bucket of grease at all times?

    33. Every contractor with cash flow problems works too hard, has too many clients and sells to much

    34. Every contractor’s income is the average of their customers and client’s income

    35. Good job pays $40K a year whereas a contractor with good financial reports earns $100K+ a year

    36. Having ten dollar conversations instead of million dollar conversations

    37. Lack of good accounting records causes 9 out of 10 contractor’s business failures

    38. Not one contractor’s business failure had meaningful records in the Quarter preceding the failure

    39. Poor contractors do their own accounting, payroll, and tax reports to save money; and yet they don’t

    40. The more you know about bookkeeping the less successful you will be in your contracting business

    41. Wealthy contractors work on building relationships and innovating (faster/better/cheaper)

    42. Wealthy contractors outsource their Accounting and get timely financial and business coaching

    43. Thinking you can only create wealth if you are doing the work

    44. Thinking you can get rich with your head in a ditch

    45. Working ten hours a day instead of focusing on marketing and innovation

    There are simple answers to all complex problems and they are usually wrong. The last thing I leave you with is knowledge is power. You have what it takes to be successful and you deserve to be wealthy because contractors add value to other people's lives'. We stand ready to serve when you are ready to contact us.

    QuickBooks Expert Specializing In Construction Bookkeeping Services


    About The Author:

    Randal DeHart, PMP, QPA The Construction AccountantRandal DeHart, PMP, QPA is the co-founder of Business Consulting And Accounting in Lynnwood Washington. He is the leading expert in outsourced construction bookkeeping and accounting services for small construction companies across the USA. He is experienced as a Contractor, Project Management Professional and Construction Accountant and Intuit ProAdvisor. This combination of experience and skillsets provides a unique perspective which allows him to see the world through the eyes of a contractor, Project Manager, Accountant and construction accountant. This quadruple understanding is what sets him apart from other Intuit ProAdvisors and accountants to the benefit of all of the construction contractors he serves across the USA. Visit to learn more.

    Topics: Construction Company Failure, Paradigm Shift, Fourty Five Root Causes Construction Companies Fai

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