Building contractors operate in a high-risk, low-margin environment. These are perfect conditions for business failure – and it is no surprise that the industry regularly tops the charts for formal insolvencies.
Unless you have a highly tuned crystal ball, trying to predict contractor insolvency as part of your pre-contract due-diligence is extremely difficult. Any assessment of a company’s financial standing is only ever a snap-shot in time, and will inevitably be based on out-of-date information
Companies fail in two ways – gradually then suddenly!
Fundamental financial issues can lie undetected for long periods of time, and even then management might not be aware of their existence. As long as income-streams are maintained, even loss-making companies can remain afloat for months or years beyond their sell-by date.
Detecting potential flaws in a company requires an experienced eye and sound commercial judgment. Due-diligence needs to be focused on looking forward as well as backwards, and really understanding the key metrics that can highlight the true performance and financial stability of a company.
CIG are seasoned professionals who have operated at senior level in construction for many years. Our intimate understanding of the business of buying and managing both design and contracting services gives us the ability to ask the right questions and to interrogate in depth for the benefit of our Clients.