There’s a common theme in the contracting industry: a contractor, extremely skilled at what he or she does and boasting a strong network, starts his/her own company. Things look extremely positive right off the bat: proposals are accepted, jobs undertaken, revenue coming in.

Despite the strong start, though, sunny beginnings don’t always lead to successful endings. In fact, it’s oftentimes the best of contractors who end up failing — and it’s because they don’t understand the true cost of being in business.

Businesses require strong business leaders. What the best of professionals in skilled trades unfortunately lack is the desire to deal with “the business side of things.”

Why most contracting businesses go under – even when times are good

Just between the years of 2007 and 2009, 31.9% of contracting businesses in the United States went under. Times haven’t changed significantly since the uptick in the economy, either — and it’s most often the small businesses that have to close up shop even when times are good.

When asked about the reasons for failure in a survey conducted by The Surety & Fidelity Association of America (SFAA), four main reasons emerged as the leaders in why contractors fail. We explore these reasons below:

Unrealistic growth: Cited by 37% of contractors as the reason for failure, unrealistic growth takes the lead. Remember the sunny beginning we spoke about earlier? When the business is just started and work streams in, what often gets neglected is the actual business set up — particularly the systems that will keep the business running and allow it to scale.These systems range from onboarding and billing to estimating and scheduling, with every other task-oriented detail in between. A lack of these systems makes it impossible for the business to scale without requiring an inordinate amount of time from the business owner. Inadequate costing and project management: Simply put — a poor job of estimating, and an unsystematized way of scheduling. A common mistake made by new contractors is to simply apply the same mark up onto every project, assuming it will bring in an even level of profits. When you’re just getting started and don’t know what you don’t know, this trial and error can work — but once you’re seasoned with jobs under your belt, successful costing requires measuring what it takes to get the job done.Avoid the “WAG” method (that’s “wild-ass guess” method for those not familiar) and approach your pricing strategically. It could literally make or break your business. Keep track of the cost of systems, processes, overhead, and other expenses for each project and apply that knowledge to future proposals. Superior project management is imperative here — take note of average change orders, schedule disruptors, backlogs, etc. Management: 29% of survey respondents cited management issues as the reason for failure. This one touches on the soft skills – knowledge of how to properly incentivize employees, manage team dynamics, and enable top-notch performance. Without proper management of your company’s people, it’s likely you’ll face increased turnover.Keep in mind, the cost of onboarding a new employee when turnover occurs is far greater than the cost of keeping current employees motivated and incentivized. Several studies show losing an employee can carry a price tag of up to 1.5 to 2 times that employee’s annual salary. (Yikes.) That takes us right to the fourth greatest reason contractors fail. Character: Let’s go back to the beginning. Skilled contractors start their own business because they’ve mastered the trade and decide to work for themselves — but that can only get you so far. It takes character to make the move and hire a general manager to handle day-to-day tasks so you, the owner, can focus on direction, growth, and profitability, or hire that business person so you can manage the day-to-day. You started this business to do what you love — choose that, and train the right person to fill in the rest.Character means handing over some of the reigns, delegating, and again, building systems that can keep your business running with or without you.

Don’t give failure the time of day

With new housing starts and renovations experiencing increased demand — and a very real labor shortage in the market — now is the time for contractors to up the ante and allow their businesses to grow successfully, without fail. Putting the right systems in place, adequately costing and facilitating projects, incentivizing and enabling employees, and building the character you need to scale your business is key to understanding the true cost of doing business and successfully forgetting failure.

Looking for the ideal place to start? Meet JobFLEX. JobFLEX is the system your small-to-medium sized contracting business needs to quote more work in less time and enable your sales team back to doing what it does best. Try it free for 30 days.

P.S. JobFLEX is coming to the Google Play Store soon! Soon, the easiest-to-use quote app will be even easier for users to get started with! We didn’t think “even easier” was possible but we did it. A new, simplified interface, step-by-step setup, and easy in-app access to settings will all be released with the Google Play version of JobFLEX. Stay tuned for more details on the release as we get closer to the big day!