Crash And Burn: Why Trade Contractors Fail

Trade contractors rank among the most common businesses to fail in the United States.

Technical service providers play a critical role in ensuring our homes and businesses run smoothly. Specialty trade contractors, such as HVAC technicians, electricians, plumbers and carpenters, have skills that touch nearly every aspect of our lives. They keep our businesses and homes comfortable, the lights on, and our water flowing safely. They ensure buildings are built to code and maintained to protect health and safety. These professionals dedicate years to mastering their craft and take immense pride in their work.

Yet, despite their importance to society, more contractors fail than succeed. Research consistently shows that construction-related businesses rank among the industries with the lowest survival rates. According to the Bureau of Labor Statistics, only about 44% of construction-related businesses survive to the five-year mark, and barely 43% last 10 years. When narrowed down to HVAC, plumbing, and specialty trades, the numbers look even more troubling: industry groups have reported failure rates as high as 70% within the first year. For an industry that holds so much responsibility, these statistics present a serious challenge.

According to David Brooks, founder of Contractor Rhino—a company dedicated to helping home service and trade contractors build sustainable, scalable businesses, “Too often, new owners assume that great technical skills will automatically attract and keep customers. Without systems for lead generation, pricing correctly, and tracking performance, they burn through cash quickly.”

The Converted Technician

At the root of the problem is what many call the “converted technician.” The U.S. Bank Study (via SCORE) found that 82% of business failures are due to poor cash flow management or a lack of understanding of cash flow. For trade contractors, the issue is not typically technical skill—the average HVAC technician or plumber is highly trained in their craft. The problem is that many are never trained in business management, finance, or customer relations before starting their company.

Without a strong business foundation, many contractors simply replicate what they’ve seen competitors do. If the competitors underprice, fail to account for overhead, or cut corners in operations, new contractors often repeat these bad habits. Over time, even the most skilled technician will struggle to survive without the ability to read financial statements, manage cash flow, or build systems for consistent sales and customer retention.

In short, the converted technician is a craftsperson first and a businessperson second—and that imbalance often becomes fatal.

Poor Accounting for Overhead Expenses

Another recurring theme in contractor failure is the inability to properly account for overhead. Overhead refers to the ongoing costs required to operate a business regardless of whether a single sale is made. This includes office rent, vehicle insurance, tools, licensing fees, utilities and payroll for support staff.

“Another overlooked piece is cash flow,” adds Brooks. “Contractors don’t always anticipate the lag between expenses going out (materials, payroll) and revenue coming in, which can sink a business in the first 12–18 months.”

Many contractors fall into the trap of only pricing jobs based on direct labor and materials. They fail to build in enough margin to cover overhead and profit. This creates the illusion of “being busy” while the company is slowly bleeding cash. A full schedule of underpriced work is more dangerous than an empty one—it keeps the owner occupied while debt and financial obligations pile up unseen.

Brooks states, “On the financial side, many owners lack a thorough understanding of key metrics, including markup, margins, and overhead allocation. They may price work based on what competitors charge, not what they actually need to be profitable. That catches up quickly.”

Studies on contractor pricing consistently reveal that many HVAC and plumbing contractors are underpriced compared to what they need to sustainably cover expenses. Over time, this mismatch between income and expenses pushes businesses into cash flow crises, defaults, and ultimately, closure.

Poor or Underdeveloped Sales Skills

Even if a contractor is technically gifted, the business cannot survive without sales. Unfortunately, sales is often the weakest skill set for trade contractors. The converted technician may be uncomfortable with the idea of “selling” and may assume that quality workmanship alone will win customers.

The reality is different. Customers cannot assess the technical quality of an HVAC installation or electrical repair as it happens. What they can assess is how clearly the contractor communicates value, options and long-term benefits. Sales in this industry is less about persuasion and more about education and communication.

“On the workforce side, the trades are people-driven industries. A bad hire, high turnover, or failing to train dispatchers and techs properly can cripple growth, adds Brooks. “If you can’t keep good people or manage the financial side effectively, even strong customer demand won’t save the business. That’s where it tips into failure because you can’t deliver consistently or scale responsibly.”

A contractor who invests in sales training—whether learning how to explain a proposal, present financing options or walk a homeowner through the risks of cutting corners—stands a far greater chance of success. Without this ability, many talented technicians fail to convert enough leads to keep their businesses profitable.

Marketing Missteps

Marketing is another crucial area where contractors falter. Acquiring customers is the lifeblood of any business, but too many trade contractors treat marketing as an afterthought. Some rely solely on word-of-mouth referrals. Others dabble in advertising without a strategy, often wasting money on campaigns that are never tracked for effectiveness.

Marketing should be treated as an ongoing business investment. A successful contractor must research their market, test different approaches, and consistently evaluate results. Whether through digital channels, community partnerships, or traditional advertising, marketing spend must be strategic and data-driven. Otherwise, it becomes just another expense eating into thin margins.

The U.S. Chamber of Commerce notes that inadequate marketing is one of the top reasons small businesses fail. In the trades, this often shows up as a feast-or-famine cycle—busy during peak seasons, desperate for work in the off-season, and unable to smooth out revenue streams with a consistent customer pipeline.

The Bigger Picture

Taken together, these issues paint a clear picture: trade contractors do not primarily fail because they lack technical ability. They fail because they lack business systems. Poor financial management, underpricing, weak sales skills and ineffective marketing combine to create overwhelming pressure.

The irony is that the same traits that make someone a great technician—attention to detail, problem-solving, persistence—can make them a great business owner if they are willing to invest in learning the business side of their trade. Organizations like Contractor Rhino, which focus on contractor-specific coaching and strategy, are stepping into this gap. They teach contractors how to price jobs properly, manage cash flow, and build sustainable systems—skills just as critical as knowing how to install a furnace or repair a circuit.

When asked “What practical strategies or systems do you believe separate the businesses that crash and burn from the ones that thrive long-term? Brooks said: “The contractors who thrive build systems early. They implement contractor marketing engines that bring in consistent leads instead of relying only on word-of-mouth. They invest in dispatcher and sales training so that every call turns into booked revenue. They track KPIs like booking rate, average ticket, and technician efficiency so they can make data-driven decisions instead of guessing. And just as important, they document processes so the business isn’t entirely dependent on the owner’s time. At Contractor Rhino, we see that the businesses that implement even a few of these systems gain predictability in revenue and free up capacity to grow. The ones who don’t often stay stuck in survival mode until they burn out.”

Conclusion

Trade contractors are the backbone of modern life, yet they remain among the most vulnerable businesses in America. Their failure rates outpace many other industries, not because of lack of need, but because of lack of preparation for the realities of running a business.

If contractors are to thrive, they must embrace the fact that running a contracting business is not the same as running a jobsite. It requires intentional focus on finances, sales, and marketing in addition to technical mastery. Only then can more of these skilled professionals move from the cycle of “crash and burn” to long-term, sustainable success.

Contractor Survival by the Numbers

• 19.1% of construction businesses fail within the first year (BLS, LendingTree 2025)
• 44.1% fail within the first five years
• 57.1% fail within the first ten years
• HVAC-specific: up to 70% fail in the first year (DOE / Service Roundtable data)
• 82% of all business failures tied to poor cash flow management (U.S. Bank Study via SCORE)

References

David Brooks is the founder of Contractor Rhino, a company dedicated to helping home service and trade contractors build sustainable, scalable businesses. With over a decade of experience in both B2B software and hands-on service operations, David Brooks has seen firsthand the challenges contractors face when it comes to marketing, sales, and growth. Through coaching, training, and practical systems, Contractor Rhino equips business owners to break free from “survival mode” and build companies that thrive long-term.