Whether you are hiring a new employee or selecting a construction company to work with, the advice is the same – due diligence is paramount.
Operating a construction company isn’t easy, which is why there is a failure rate of nearly 30 percent. Although there are hundreds of reasons why construction companies fail, it’s typically not caused by a single issue. So, if you are in the market for a new construction company or just want to compare the one you are currently using with others, pay close attention to these questions you should be asking.
Experience and Cash Flow Management
Ask about the company’s project and cash flow experience. Don’t just take the information they have on their web site as gospel. Use it as a starting point to dig deep and talk to previous clients. Repeat business from the same client is always preferable. Have a conversation with their CFO to ensure they have sufficient capital to not only make payroll but also to minimize debt, reinvest in their business, and have a buffer for emergencies. Presumably, you don’t want to repeat the vetting process every time you need the services of a construction company. Make sure the company you choose has the expertise and the financial backing to survive cyclical ups and downs in the economy, and this could be a decades-long relationship.
Find out what type of work they are seeking. Often, problems occur when a company tries to grow too fast without having the resources, manpower, and know-how to successfully execute its growth. If they are expanding beyond their headquarters location, ask why and how they have prepared themselves for expansion. Growth is great, but poorly managed growth has closed the doors of many companies. Just as you want to make sure they are a good fit for your construction project, they need to ensure you are the right fit for their firm as well.
People and Performance
Not surprisingly, having the right leadership for any construction project is critical. From top to bottom, employees need to be engaged and valued for them to give your project its best effort. Take the necessary time to vet the entire team because there is a reason that turnover in the construction industry is high. Talk to the company’s HR person to see what the company is doing to recruit and retain employees. Ask about deadlines and what their process is for sticking to them. Investigate their industry reputation. If they are good, they will have one, and they will be visible in trade magazines and/or have media coverage.
Innovation, Not Just a Buzzword
Failure to adapt to technological change has been the downfall of countless companies, both large and small. Like most businesses, the construction industry is in the midst of a digital transformation. Whether the company is using drones, taking advantage of big data, or has the latest mobile apps, be sure to ask how the company is keeping with technology. Underinvesting in technology is a significant red flag, so be sure to ask specifics about how the company is moving forward in this arena. Building information technology helps companies generate computer representations of buildings and utilities, leading to on-time and accurate completion. Construction management software allows companies to be competitive by mastering operational efficiency by compiling data and sharing files. Technology is one area in which a company that has been around for several decades may be at a disadvantage if the executive team is “old school” and hasn’t given top priority to ensuring that mid-management has the tools and the skills to adapt to ever-changing technological advancements.
Knowing how to build things on time and on budget are great, but if the construction company you are considering knows very little about architecture or green building, then they probably aren’t the firm you want to hire. Various pressures within the industry, as well as customer demand, indicate that renewable energy will continue to grow in its importance, particularly as Millennials demand the very most from the companies they do business with and as the world better understands (and acts upon) the effect of global warming. Depending on the scope and/or goals of the project, intimate knowledge of building materials and architectural features are also critical. Equally important is knowing the best way to obtain a permit, following strict safety protocols and having reliable subcontractors and inspectors.
As you can see, doing your due diligence is critically important when you are selecting the right construction company for your project. The team at J4 Development has a well-earned reputation for working in unison with owners, developers, and architects during the design phases to assist with engineering and project schedules. Our staff can identify potential pitfalls, develop an executable scope of work, and build a comprehensive budget to assist with the valuation and construction plan. We look forward to answering your questions when you are ready to do your due diligence with securing the right construction company for your business needs.