Why You Shouldn’t Bid the Big Project

In construction, the temptation to take on larger projects can be irresistible. After all, bigger projects mean bigger revenue, right? However, research shows that jumping to significantly larger projects is one of the leading causes of contractor bankruptcy.

When contractors take on projects 2-3 times larger than their typical size, they often underestimate the fundamental differences in complexity. A $6 million project isn't simply three $2 million projects combined - it requires more sophisticated management systems, larger staff, new subcontractor relationships, and significantly greater cash flow.

The cascade of problems typically includes:

• Straining existing resources by pulling key staff from other projects

• Cash flow crises from slower payment cycles and large amounts of retainage

• Reduced bonding capacity preventing bids on usual work

• Loss of core business due to focus on the large project

The solution? Smart growth through gradual increases in project size, maintaining a mix of project sizes to spread risk, and making sure you have the right tools to maximize operational capacity and manage subcontractor relationships.

Remember, the most successful contractors aren't necessarily the ones doing the biggest projects - they're the ones consistently delivering profitable projects within their expertise level.

This is the first in our five-part series examining the major causes of contractor failure, as detailed in Thomas Schleifer’s book Construction Contractors’ Survival Guide. Stay tuned for our next installment where we'll explore another critical risk factor facing today's contractors.