Key ingredients that make the difference between survival & failure of a young construction company:
1) Business plan – the process of preparing a business plan is often as important as the plan itself.
2) Construction knowledge & experience – personal involvement and mastery of a trade is invaluable.
3) Vision for the business – devising a strategic plan including where the owner wants to take the business and how to get to that point.
4) Cash reserves or cash flow – cash is essential for survival in the construction business and even more important with the current bank lending climate.
5) Accounting system software installed in an office computer with owner’s knowledge of how to operate it. Arrangement with a CPA to review information monthly, annually, and prepare tax returns.
6) Understand how financial reports are prepared and how to read and use them including profit & loss, balance sheet, accounts receivable, accounts payable, cash flow statement, and work in progress reports.
7) Having a banking relationship including a line of credit. While the line of credit will be small initially, it will be allowed to increase as the company develops a track record.
8) Estimating – owner must be able to complete this task or be knowledgeable enough to hire and supervise it.
9) Project Management – direct and supervise a quality, on-time, within budget project without any safety hazards. This includes an ability to manage, track labor, and productivity.
10) Marketing & Sales – must meet and create the contacts to open doors for new projects and to close on sales.
11) Understand key components and risk transfer in contracts.
12) Hiring a competent staff