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The 5 Biggest Threats Facing Minority Owned Construction Companies in Houston

According to the City of Houston, we will continue to boom and deliver strong economic performance here in Houston, Texas. That's great news for Houston businesses. In fact, we're very fortunate compared to other U.S. cities because of the diverse industries that make up our economy. Our energy sector is thriving, the Port is expanding to prepare for 2015 and the Post Panamex Ships, The Medical Center has an exciting new leader, new focus and new partners, and manufacturing and service firms are growing too; specifically: construction, legal, auto dealers, etc...

In the next 3-5 years, $200 Billion in industrial and manufacturing projects will hit our region from Corpus Christi, TX to Pensacola, FL. Over $70B of that will be in Houston alone. As the market begins to become flooded with these new construction projects, minority firms in particular will find it difficult to keep up with the demand and opportunity. Most firms are not ready for expansion and aren't sure how to position their company for profitability and growth so they can take on more projects. Out of the 4,000+ minority firms in Houston in this sector, very few will be awarded these projects. Through extensive research we've found there are 5 Big Threats Facing Minority Owned Construction Companies that will keep them from surviving:

  1. No sustainability or scalable plans in place - small construction companies are typically doing business as usual. Developing a sustainability and growth plan not only takes real strategic expertise, it takes time. With the current workload and lack of strategic expertise, small construction firms are at risk of not being prepared to scale their business in order to win more projects.
  2. Skilled labor shortages - a major fear and legitimate concern across all industries is the lack of skilled labor to fulfill all the new jobs that will be needed to fulfill the contracts. Skilled, quality work is already difficult to find, with thousands of more jobs in demand, where will businesses find these workers? Most small firms are at a huge disadvantage because they don't know how to plan ahead for these shortages.
  3. Poor communication strategies across the value chain - from suppliers and vendors to project completion, there is a major breakdown in communication with contractors, field workers and internal staff. This causes project delays, overages in budget and even worse, it could prevent project completion. Safety concerns also becomes a real concern and leaves smaller companies at risk of losing business or increases their liabilities.
  4. Lack of funding for expansion - when small companies aren't prepared for growth and haven't positioned themselves properly with banks, investors and funding sources, it causes these businesses to lose faith that funding would be available even if they do qualify and win the proposal. Some construction companies are in such bad shape financially, they won't even try to go out for upcoming projects.
  5. Little to no RFP and proposal response experience - unfortunately, most small construction firms are spinning their wheels in this department. Putting in proposal after proposal and hundreds of hours and resources just to find out their RFP wasn't even a consideration simply because they approached it wrong. Unfortunately, according to research, 75% of all vendors are chosen before the vendor selection process even begins! What a waste of time and resources that these minority construction companies just don't have to begin with!

All of these threats could drastically affect minority construction companies from winning their share of the $70B in projects that will enter our market in the next 3-5 years. The good news is... there is help out there. If you are a small construction firm, start with these solutions and resources and take action NOW to prepare. If you do not position yourself in the next 12-18 months, you may not only lose out on these new projects but you are also at risk of losing your business.

Three ways to protect your company against these threats:

  1. Reach out to a strategic planner, your local bank or an Inter-Agency in Houston to get some advice on where your company stands
  2. Position your company for growth by participating in local programs that prepare you for profitability, growth and sustainability
  3. Find a company or program that can take a look under the hood, assess your business and give you a list of recommendations that will prepare you for winning projects and reduce risks

Sources available to you:

Preparing for the next 3-5 years' of Houston growth comes down to taking action TODAY! Be proactive. You know the threats and challenges now, use the resources and suggestions here to make a difference in how your business survives and thrives in 2014 and beyond. Time is running out!