Risk & Business Magazine CMW Insurance Fall 2015 | Page 6

Successful Contractors

The Benefit of Being Surrounded By Experienced Advisors
BY: STEVE McCONNELL, CLIENT EXECUTIVE, VICE-PRESIDENT, CMW

T

he construction industry is still one of the great workplaces
where the combination of an entrepreneurial spirit, a
strong work ethic and minimal capital can translate into a
thriving multi-million dollar regional business. It is also an
industry that, similar to the restaurant industry, has horrific
statistics for business failure. Despite the risks, there are a
great number of local contractors who have formed and built
excellent construction companies that have weathered economic
downturns and many other risks that have taken down their
competitors. What’s their secret?
Despite the presence of some large national contractors,
construction still remains an industry dominated by lean,
independent, local companies owned and operated by one or two
key people. The path for most of these companies is a proven
and well worn road. Companies are formed when like-minded
individuals join forces. Usually the company is created when an
individual with strong building and field experience partners
with someone with strong finance and administrative abilities.
Starting with smaller projects, the company gradually takes
on larger and more complex projects. It is not uncommon for
a company to grow from a small contractor into a large multi-

million corporation in just a few short years. For a select few, the
company grows into a group of diversified companies, usually
involving property development and management.
Challenges of Growth
At each stage of growth, there are unique challenges that
threaten a construction company’s survival. Many companies
fail because they lack the ability to identify new risks as they
grow. When the company is small, a smart owner can monitor
all aspects of the business. At a certain size, authority and
responsibility must be delegated. Internal monitoring systems
and standard procedures must be developed, followed and
audited. A construction company can fail for many reasons
including unmanaged growth, geographic expansion, economic
downturn, insufficient bank support and poor internal
financial management. Each new project can also bring its
own obstacles. This can include unscrupulous clients, unfair
contract language, hiring and retention issues, financial failure
of key subcontractors and probably most frequently, unpaid
invoices. The successful contractor must engage a skilled an