Top 3 factors causing construction businesses failure

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Top 3 factors causing construction businesses failure

Most construction businesses in Africa are not too big to fail and in the past few years we have seen big firms close down despite the fact that they have been having big annual returns worth Millions to billions of dollars in a year.

The most recent affected firm in Africa is the Murray & Roberts group which was forced to close its construction wing over various reasons.
Therefore we highlight some of the reasons to why a construction business in Africa is likely to go down despite the fact that it has been doing well in terms of market share.

1) Setting Unrealistic growth

The industry has regularly witnessed smart leaders in the construction industry come down due to setting unrealistic business goals that can’t be attained hence leading to mistrust among the clients and the contractor.

2) Over expansion

Some firms in Africa have been looking into expanding to more areas that they are sure that they won’t deliver hence they fail to deliver projects that are put before them.
This is the one that leads the firms to venture into unfamiliar new markets or entry into new types of construction

3) General Economic Conditions

Specific economic forces affect contractors through many paths, including bonding issues, demographics, government policy, tax law, consumer confidence and even material shortages.

For example, contractors may blame their financial disaster on a lack of available work due to a suppression of construction plans that is caused by an increase in interest rates. The fact that not all contractors fail during difficult economic times indicates that there are other, more relevant causes.

In fact, many seasoned industry executives emphatically reject the notion that luck or other extraneous forces are responsible for a company’s decline. Nonetheless, research indicates that these external factors quicken the pace of demise for companies that suffer in other areas of concern.

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