Why Small Construction Companies Fail

Perhaps the biggest mystery in entrepreneurship is why some of the businesses that seem to do everything right still fail. What are the challenges your small business will face, and how can you overcome them?

Lack of Capital

One of the most common things most construction companies struggle with is ensuring that they have enough cash flow to cover their daily expenses and fund their projects until they can obtain progress payments.
It’s critical to make a good and thorough estimation of your cost centers. That’s the only way you can estimate your budget and plan how to allocate resources and what you need to do to obtain additional capital. The last thing you want is to dig into your personal bank account to meet your company’s financial requirements.

Lack of or Bad Planning

The key to avoiding failure is to prepare in advance of various potential scenarios, regardless of how unlikely some of them might seem. Look at your current projects and map out the details of each stage, anticipating challenges down the road and how you can surpass them. With a strategy in place, it’s easier to plan the use of your resources – time, financial, and workforce – and to reduce waste.

Premature Scaling

At first glance, overnight growth sounds like excellent news. But it’s not. When you grow too quickly, you tend to overlook your capabilities and end up taking on projects and responsibilities that require far more resources that you have available. You find yourself way over your head, forced to deliver low-quality services, completing projects with delays, and worse, damaging your reputation. It is important to make sure you have enough quality staff members on your team before trying to scale.

Failing to Adapt to Changes

You’ve made sure to plan every step in advance, but here’s the thing; you need to be flexible if you want to survive and thrive in a constantly evolving market.
Check your plan regularly and compare it to market trends and changes. Note what works and what doesn’t, and make adjustments as needed. Unwillingness to admit your mistakes, learn from them, and apply the knowledge you’ve gained to future projects is a sure way for your small business to fail.

You Don’t Focus on Advertising Your Business

Regardless of how good your products or services are, if prospects don’t know about them, your business will have little to no chance of effectively scaling.
The days when newspapers, flyers, and phone book ads worked are long gone. It’s time to focus on digital advertising, SEO, and content marketing. Design a website and update it regularly; use social media to connect with your audience and educate them about your services, and build a strong online presence if you want your business to succeed in the digital age.

You’re Underestimating Your Competition

Being in an overly competitive market isn’t always a bad thing. Sometimes, your opponents can provide inspiration, insights, and best practices that you can use as guidelines to plan your activity. Whenever in doubt, in need of new ideas or even facts, take a look at what your competitors are doing, and how they are doing it. See if there’s something valuable for you to take from them, and then leverage it to make sure you’re a step ahead.

No Differentiation

You can’t survive in a market as competitive as the construction industry if you can’t find and showcase the things that make you different.
After you’ve researched your competitors and analyzed their way of doing business, compare their practices with yours to see what’s different about your construction business. You have to come up with a unique value proposition that addresses the needs, wants, and concerns of your target audience, and most importantly, you have to let them know about it.


Don’t fool yourself into thinking you can scale your small business overnight and address the challenges mentioned above. Not only can being aware of these challenges help you keep your company afloat but effectively addressing them can help give you the tools to survive within a highly competitive environment and industry.