You might believe that bigger projects = more money.

It sounds logical. One big job should be more profitable than many small ones, right?

Not quite.

This week, I’ve been thinking about a dangerous pattern I’ve seen too often: Construction and Project Management firms chasing projects that are 2x, 3x, even 5x, larger than anything they’ve done before.

And at first, it feels like the right move. The revenue projections look incredibly attractive, and there’s a sense of validation.

You start to think:

• This could put us on the map.

• We’re finally in the big leagues.

• One big win could replace years of smaller jobs.

• We can finally buy new equipment, hire better people.

• The margins look good, we could be set for years

• If we don't take it, someone else will.

Unfortunately, here is the hard truth:

These same projects often lead to collapse.

This week, I revisited a powerful section from Managing the Profitable Construction Business by Thomas C. Schleifer (Ph.D) et al, which captures the danger perfectly.

The book gives a clear breakdown of how a company doing $1M projects with a $3M annual volume, profitable, healthy, balanced, can spiral into cash flow crisis and operational overwhelm with just one $3M project.

Even if the project is similar on paper, it comes with a completely different set of demands:

• More red tape

• Tighter supervision

• Higher retainage

• Longer timelines

• Strained resources

• A level of complexity no spreadsheet can fully capture

And when that happens, the firm isn’t scaling, it’s stumbling.

The excerpt below from the book captures the consequences of large-scale projects so powerfully that I had to share it in full.

“By far the most common element among contractors who fail is a dramatic increase in the size of projects undertaken. […] Undertaking larger projects is a natural part of the growth of a construction company; the order of magnitude addressed here, however, is two times or greater than the previous largest project.

We’ll take a $1 million current top size as an example, but the principles hold true for any project.

Case study: A contractor’s largest project is $1 million with two or three major jobs at any given time, say, $600,000, $800,000, and $1 million, and probably a number of smaller jobs in the under-$100,000 range. The company’s annual volume is $3 million, and it is generating a comfortable profit margin. When work dries up and backlog approaches zero, the managers go after larger and larger projects. They are able to get a $3 million project, and in their estimation their problems are over for a while.

In fact, their problems may just be beginning. Let’s look at the impact on their organization. Previously projects took about a year or less to complete. On the average one of their larger projects started about the time another finished and a third was at its midpoint. On the project near completion they needed to collect considerable retainage, but the one in the middle stages was generating large monthly payments and the one starting up was about to produce some good cash flow through front loading. By handling jobs in sizes they were accustomed to, which normally were in varying stages, they not only had a reasonable cash flow, but also had the time and resources available to look after all of their small jobs and keep them profitable.

Contrast this with one $3 million job. At first, the front load is terrific, but the retainage mounts fast and within six or eight months will become a higher amount than the company has ever had out on all jobs combined. By the end of the job the amount will be strangling the business, and this project will take longer to finalize than anything ever undertaken. While the project is similar to the work the organization has done, they may be surprised at the level of inspection and supervision they are subjected to by the architect or engineer. Municipal, state, and lender inspections may create more red tape than management is used to or than field staff can effectively handle. Union work rules are usually more strictly adhered to on larger jobs, and security and safety requirements broaden.

The larger project, although similar to other jobs the organization has performed, is not within its experience. The company can get the job done, but making a profit at it is another story. It is similar to a paving contractor who does driveways and parking lots taking on an interstate highway project. Building a parking lot and building a highway are similar but certainly not the same.”

So, what’s the takeaway?

Growing your engineering and construction business isn’t about chasing the biggest project you can land.

It’s about growing your capacity, your systems, your team, your cash flow, then your projects.

Size without structure is a recipe for disaster.

P.S

A big part of my day job is analysing the root causes of stalled growth in mid-sized Engineering & Construction businesses. Often, the symptoms are obvious, but the underlying issues are more complex. Over the years, I have consolidated my knowledge into a structured framework that quickly and efficiently identifies key growth levers based on 5 critical business areas.

This framework, called the ‘E&C Growth Index’, is designed to help you get to the heart of what's driving (or hindering) your progress. Think of it as your initial strategic diagnostic.

Click here to fill it out, it’s completely free, and I'll be happy to discuss the implications for your business.