6 Tips for Protecting Your Start-Up Construction Business
Construction firms thrive on a sturdy basis of planning and forethought. When your business is just getting started, you as a business owner will need to learn about which possible risks your business may face within the construction industry. This will provide you and your employees with the peace of mind and the confidence you require to develop and thrive well into the future.
Considering all the “moving parts” you will need to account for, starting a construction company and maintaining one for the long-haul is no small feat. You need to stand out among competitors, protect your business from damages and liability claims, and you will need to ensure you have the right equipment for the type of work you are planning to do.
Here are 6 ways you can protect your start-up construction business.
Research, research, research.
As your company gets going and begins to develop, you may want to take some time to research the best ways to manage the pressures of the construction industry while keeping mind of all the exposures you may face as you grow. Researching your options is one of the best possible ways to provide you the confidence you need to make the right decisions.
One of the first things you should research is how to identify the type of risks your construction business may face. This ties in with the next tip:
Identify your risks.
This is the first and easiest step to protecting your start-up construction business. While not all your risks may be apparent if your business has only just gotten off the ground, you can use a little forethought or even hire a legal advisor to review your business and help you make a list of all your possible risks. These may include:
- Occupational risks and hazards, such as the unexpected malfunction of equipment, hazardous weather at a job site, lack of safety equipment, busted guardrails, and more are all occupational risks. Occupational risks can account for the largest percentage of construction industry fatalities – and they can be easily avoided by complying to your provincial or state safety regulations and ensuring your staff receive adequate training.
- Contractual risks include the inability to comply by the agreed upon project deadline or the failure to meet the standards of what was agreed upon via contract. You might find yourself strained due to a lack of resources or difficulties with productivity.
- Financial risks may include the rising costs of material and labour, unexpected setbacks, repairs and replacements, and more. When your construction business is still fairly new, you’ll find yourself facing a rather tight budget, so it is important to allocate your funds wisely. In this case, having the right insurance is a good way to preserve your finances.
Once you have a better idea of what your risks may be, it’s time to prioritize and organize them in descending order of severity and/or impact.
Transfer your risks.
Risk transfer is yet another risk management strategy to help protect your start-up construction business that involves shifting a risk or exposure from your business over to another party. This could include a hold-harmless clause within your contract or a requirement via your contract to provide insurance for the other party’s peace of mind and security. The transferral of risk ensures that risk is allocated in an equal way, allowing the risk to be more maintainable and equitable so that the entire force of the potential loss is not suffered by your business alone in its entirety.
Where possible, you will want to identify any opportunity to have other parties – whether that’s the hiring body/client or your subcontractors – assume some share of the liability.
One of the easiest ways to transfer risk is through purchasing insurance. When you purchase insurance, a specified potential loss (or several, depending on your policy) is passed on from you, the policyholder, to your insurance provider. The transferral of risk through the purchase of insurance is detailed further in the next tip.
Work with an insurance broker.
Sometimes, things happen. Whether a piece of equipment gets damaged or an employee or even a client is injured, you might be left on the hook for the repair or settlement costs. A great way to ensure you can get back on your feet after a loss like this is by purchasing insurance that is fitted to the needs of your construction business. If your construction business is especially new, this is critical as you may not have the funds necessary to resume operations as per usual following a litigation event or disaster.
An insurance broker who knows your industry well may be able to help review your construction business’ requirements and you can disclose your budget to them so that they can shop around for competitive quotes that work. They may offer you different coverage options, like commercial property insurance, contractor liability insurance, equipment breakdown, and more. An insurance broker is your best resource for insuring your construction business so that if a liability claim should ever arise, you have the protection you require.
Avoid your risks.
Not every risk can be managed. If something seems inevitable, the best way to protect your start-up construction business is to avoid the potential risk. For example, your business might refuse to do work in an area that is flood-prone. Another means of avoiding your risk or “loss prevention” can be avoiding hiring the lowest cost subcontractor. This can be tempting, especially as your budget might be tight when you are just starting out, but this may mean hiring an individual with a particularly poor reputation who does not have the correct qualifications to do the job. Your first and foremost consideration should be the quality of the work you do.
This should go the same for your existing employees or subcontractors. If you feel that the work they are doing is not safe, you may want to end that relationship to preserve your business’ good reputation and clean slate.
Don’t overlook risk management as you grow.
Unprecedented growth or simply just growth overtime brings with it a host of new issues, like a larger team of employees who will require proper orientation, bigger clients, longer contracts, and more. Risk management is something you should undergo as often as possible – like if there is a huge change in the way you do your business or annually. Ensure that you are only ever hiring licensed professionals and legally transfer your risk where possible.