Challenges Faced by Small Construction Companies

The construction industry plays a core role in the socio-economic development of any country. The construction industries generate substantial employment. This industry provides buildings and infrastructure. That are essential for the operation of various other industries. With the increase in demand in the field of construction. There comes challenges in the area of performance, profit, productivity, sustainability, labor, and total industrial growth.

High Raw Material Costs:

Construction contractors in Toronto are at high risk of cost changes due to the fixed contracts and hypothetical home construction. The land and raw material costs can fluctuate instantly. With the swift change in prices. Small construction companies have less leverage. They are greatly affected by cost variations between the time the project starts and when it ends.


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Shortage of Experienced Workforce:

The construction industry is on its peak as we move towards the future.  It is heavily dependent on manual labor even with the latest technology. However, Canada has an aging workforce, and the demand for skilled labor is on the boost. The industry is having a  crucial time recruiting skilled workers to fulfill the rising demand. The young people do not find construction jobs very fruitful and are opting for other careers. It is the biggest issue faced by small scale construction companies. This issue requires the construction companies to spend on training the people for the job to tighten the gap of the shortage. It also requires small construction companies to give additional benefits to the staff. It also gives birth to safety issues if the staff lacks experience.


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Endorsement of New Technology:

The rise of new technologies has completely transformed the construction services in Toronto. So it plays a  core role not only in the day to day operations. But will also be challenging to gain projects. Technological advancement allows the small construction companies to compete in the rapidly evolving world. Construction technologies include cloud-based software, estimating technology, mobile, and wearable. Investing in expensive technologies can be a real hustle for small construction companies. While introducing new technologies, take special care; you don’t want to upset labor that uses old school ways.

The introduction and implementation of new technologies should be slow and steady. It will help you to reap greater benefits, and the employees will be less likely to make mistakes.

Safety Measures:

Worker safety continues to be an issue rotting the construction industry. For years, construction has led all industries in the total number of worker deaths. The number of workplace injuries has remained constant for years. Keeping workers safe and protecting them against accidents and injuries should be the top priority for all business owners.

Training is the finest way to keep your labor safe. Safety training should not be a one time job. The workers need constant training to ensure that they are aware of safe work practices. The lessons they have learned should have strict reinforcement. Accidents are easy to prevent when you enforce tighter safety measures.


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Slow and Delayed Payment Process:

Small construction companies in Toronto often have problems in controlling cash flow as they do not have suitable invoicing systems. A progress payment schedule can help you to evaluate the expectations at different phases of the project and determine when each phase is considered complete. Without regular progress payments, you can have too many resources tied up in one job, which can greatly affect your cash flow.

Meanwhile, If the client is not conscious about the cost of delay or if there are complex procedures, there is a big chance that the contractor will not get paid on time. Delay in payment creates the problems for small-scale contractors to a whole new level. It hurts their profitability, which in return affects their ability to meet a deadline.


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Limited Capital Resources:

You should not underestimate the capital requirements to seek the most profitable projects. Many small construction businesses underestimate how much money they are going to need to fund projects until they receive progress payments. Working capital is critical to the success of every construction project, and companies should ensure they have the right cash flow to avoid making bad decisions. Starting undercapitalized may be the beginning of a downward spiral that will make it difficult for you to recover.

Unlike large scale construction companies, small-scale contractors tend to operate on shoestring budgets. They don’t have the financial pull to oppose operational challenges, expand their operation, or to hire full-time professionals. That can help them fix the deficient parts of their businesses. That is the reason why the majority of small scale contractors prefer a construction bond over alternatives such as a letter of credit. Since the surety bonds are fairly inexpensive, small-scale contractors will be able to stretch their working capital to ensure that they will finish the project and keep their businesses adrift. The contractor will only pay a minute fraction of the bond amount rather than knotting their entire savings or a real estate property as a mode of guarantee. Surety insurers can provide financial assistance and, they also can help contractors in managing their construction projects as well.

Major Challenges Faced by Small Scale Subcontractors:

Whatever is the size of the project, there comes a problem with sub-contractors if the right person doesn’t deliver the work. It is indeed a huge problem faced by most of the contractors. The most common advice to such issues is to study about the sub-contractor before the delivery of the work. Verify the opinion or suggestion about a sub-contractor through any other sub-contractor who you have had any experience with before. Check the details and license of the sub-contractor and proceed with the work. It is necessary to check whether the sub-contractor possesses general liability insurance.


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Time constraints are also a major challenge faced by small scale contractors. As projects continue to be readily available and are becoming increasingly more sophisticated, subcontractors are hustling to stay on schedule. Many have taken measures to combat this issue by utilizing project management technology that allows them to manage time during the project by streamlining the daily processes. Streamlined communication, real-time data entry, and easily usable field solutions have cut down the lard on construction projects, allowing subcontractors to do more in less time.

Diverging away from the vision and capabilities is the toughest hurdle faced by any company. So if you fail to cope with the pace with demand or expand without limited capital resources, the existence of your business is at risk. Planning for future growth and tracking it so that it doesn’t get dangerously out of hand is critical.

As with any industry, many issues at hand subcontractors are willing to stay because of the nature of the business. However, with the increased embracement of technology, the construction subcontractor market is becoming more competitive than ever before. The subcontractor must cope up with industry trends to know exactly what problems they will face and how they are going to react to these challenges.

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