Mechanics Lien Importance Highlighted By Contractor Failure Rates

On December 12, 2012 ?By Scott Wolfe Jr

Failure rates of businesses after a 5 year period by industry sector, showing that after 5 years only 36.4% of construction businesses survive. Data compiled from the Census Bureau?s Business Dynamics Statistics by Scott Shane for Small Business Trends.

Hat tip to Mark Paskell of the Contractor Coaching Partnership blog for digging up a recent article from Small Business Trends reporting on the failure rates of construction businesses after a five year period. ? The article highlights a?statistic?that should strike fear into the hearts of credit managers at construction or supply companies across the United States: After a 5 year period, only 36.4% of new construction businesses survive.

That makes the construction industry one of the most volatile. Our readers shouldn?t think of this as much of a secret, as we?ve reported?similar?statistics?in the past, such as this post: ?High Debt Ratios In Building Supply Industry Means High Risk ? Can You Control The Risk?

So, what can you do about this?

The Contractor Coaching Partnership blog article focuses on what businesses must do to survive in the market and prevent itself from falling prey to this statistic. I, however, want to reverse the thought process and focus on what businesses must do to avoid being?financially?burned by a contracting company that goes belly-up.

when push comes to shove, it?s all about what frontend work your company has done to create loss-saving opportunities in these situations.

Just yesterday a client contacted me to advise that a good customer was filing for bankruptcy. The customer owed them nearly $100k. ?These situations repeat themselves day-in and day-out across the country in the construction industry, and when push comes to shove, it?s all about what frontend work your company has done to create loss-saving opportunities in these situations.

What can you do if your customer files for bankruptcy protections? ?If you didn?t preserve your mechanics lien rights you?ll be left fighting for scraps with other creditors in an expensive bankruptcy proceeding. ?Those with protected lien rights, however, will simply bypass the bankruptcy process and collect from property owners, bonds, property equity and more. ?It?s a no-brainer. ?Mechanic liens save the day in the face of a bankrupt client.

Tags: Bankruptcy, Contractor Coaching Partnership, Credit Management, Credit Policy, Credit Risk, Debt Ratio, Featured, Mark Paskell, Mechanics Lien, Preliminary Notice, Small Business Trends? / ? Leave a comment

About the Author: Scott Wolfe Jr

Self-proclaimed "Mechanics Lien and Preliminary Notice Guru," Scott is the founder of Zlien, a nationwide mechanics lien and preliminary notice filing service. He is also the founding author of Zlien's Lien Blog, authoring over 800 articles and writing over 300,000 words about mechanics lien laws since its inception in 2007. Scott is also the founder of Wolfe Law Group, a construction law firm that practices along the West Coast and in Louisiana. He lives in New Orleans, LA, where he was born and raised.

Source: http://www.zlien.com/blog/mechanics-lien-importance-highlighted-by-contractor-failure-rates/

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