Date Published: September 11, 2014

It’s difficult to make money in construction; especially in lowest-bid public works contracting. But at Surety 1 we routinely see contractors who lose money make the same mistakes.  Here are 5 of the most common mistakes losing contractors make.5 common contractor mistakes

  1. They calculate their bid on what they think they need to secure the job, rather than bidding the job and seeing where the chips fall
  2. They drain money from the company rather than reinvesting profits. Take the profits and invest in good people, quality internal controls, management software, a CPA statement, etc.
  3. They have poor internal controls.  When a banker or bond agent asks for a financial statement, the profitable contractor can produce a meaningful balance sheet, P&L on a percentage of completion basis, with the work in progress report.
  4. They go outside of their expertise.  This could be taking on a job too large, going into a new geographic location, or trying a new trade outside their expertise.
  5. They do not not accurately estimate.  A job cost breakdown should be detailed down to the dollar and account for both hard and soft costs.  Too many contractors that routinely lose money do not account for proper management time, insurance and bond costs, delays, set up costs, administrative costs, etc. when calculating their bid.  The end result is a job they think they made 20% on that turned out to be a loser.

To state the obvious, contractors never hope to lose money.  But from a bonding perspective, not only does losing money hurt the bottom line, it makes it very difficult to obtain bid, performance, and payment bonds.  Being able to bid public works requires bonding, the lifeblood of a public works contractor. Sharpen these 5 steps and watch your profits, and bonding, grow!

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