Causes of Subcontractor Business Failure and Strategies to Prevent Failure
Publication: Construction Research Congress: Wind of Change: Integration and Innovation
Abstract
Construction is a risky business, and subcontractors often find themselves in financial difficulty, which results in business failure. This paper reports the results of a study undertaken to investigate the primary causes of subcontractor business failure and to identify strategies for preventing failure. Construction industry bankers, bonding professionals, construction accountants, and specialty construction firm owners were interviewed to collect information regarding the primary causes of business failure, to determine if the primary causes varied based on the size of the construction firm, and to identify strategies that company leaders could adopt to prevent these problems and reduce the risk of business failure. There were some external economic factors identified that influence the profitability of a firm, but most of the causes identified relate to the business practices of the company and the lack of an effective business plan. The primary causes of business failure identified were insufficient capital/excessive debt, lack of managerial maturity, lack of early warning measures, increase in project scope, poor billing procedures, failure to evaluate project profitability, unfamiliarity with new geographical areas, and poor use of accounting systems. Based on the results of this analysis, risk management strategies were developed for small, mid-size and large firms.
Get full access to this chapter
View all available purchase options and get full access to this chapter.
Information & Authors
Information
Published In
Copyright
© 2003 American Society of Civil Engineers.
History
Published online: Apr 26, 2012
Authors
Metrics & Citations
Metrics
Citations
Download citation
If you have the appropriate software installed, you can download article citation data to the citation manager of your choice. Simply select your manager software from the list below and click Download.