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How to Start a Construction Business

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After working in construction, you may be thinking about starting your own construction business. Although starting a construction business can be risky, many factors could affect your company’s performance. Construction businesses that have few employees and have been in business less than a year have a higher chance of failure. 

That is why it is important to conduct thorough research.  Develop a business plan prior to starting your own construction business. The more details you compile and research before starting will help you prepare. 

Here are some steps to take to start your own construction business:

Conduct Market Research and Create a Marketing Plan

Begin by researching your potential customers, competition, and the construction industry. You should find out if the market is oversaturated with construction businesses. It is also important to conduct market research to understand how you will gain customers. The Small Business Administration (SBA) has great resources. They provide data on customers and businesses for you to review. 

Once you conduct market research you can create a marketing plan

Here are examples of some questions you should ask yourself:

  • Should you start small and do side projects first and then grow larger as you receive more opportunities? 
  • Would you prefer to start with residential building construction or remodeling homes and then move to commercial businesses later? 
  • Is there a demand for a new construction company? 
  • Is there housing or business growth in the area?
  • Do you have customers who are already interested in your new business? You have probably already developed a reputation if you’ve been working in the construction industry. Is your reputation good enough to ask for recommendations?
  • What type of pricing would you offer, and would that pricing survive economic downturns? 
  • What other companies in your area offer the same services? 
  • How will you differ from the competition?
  • What problems will you solve?

Research other ideas to determine what you need to do. You want to ensure your business will survive more than a couple of years. Also, follow suggested methods so you can validate your business will make money. 

Develop a website. Have you been doing construction projects on the side? List some projects on your website and show before and after photos. Consider joining Facebook groups to establish yourself as an expert. Network and join community groups to develop connections. 

Need an Affordable Time Clock App for Your Employees?

Determine the Legal Structure of Your Business

Once you are ready to start your construction business, you should decide which legal structure is best. This decision will impact your personal liability and the amount of paperwork you may have to complete. 

Review the advantages and disadvantages of each legal structure. Choose the one which fits your needs the most. You may want to consult with an accountant or attorney that knows the construction industry. They can help you decide what is best for you. 

Write a Business Plan

A business plan is a document outlining your business goals and strategies for achieving them. It will help you to organize your thoughts. It will also help you identify the competition and generate more ideas to make your business successful.

Writing a business plan is necessary if you plan to ask for funding, and it forces you to organize all your plans in one document. Much of your research may already be completed if you followed the steps to validate your business idea as mentioned above.

By writing a business plan, you are showing yourself, your financial institution, and your team or partners that you are fully committed to making your business happen.

There are many examples online of different types of business plans. The SBA offers a business plan tool to help you write your plans and they also offer examples of different business plans for a product or service

Determine How to Fund Your Business

It is important to calculate your construction business startup costs before launching. According to the SBA calculating startup costs helps you:

  • Estimate profits
  • Do a breakeven analysis
  • Secure loans
  • Attract investors
  • Save money with tax deductions

The SBA also has a startup calculator to help you determine your costs. Once you know those costs, you will have a full picture of what is needed to help your business run. They recommend creating a formal report of your expected startup costs. Investors and lenders compare expected costs against projected revenue. This helps to determine your business profit and determine your risk. 

Obtain the Required Licenses, Permits, and Insurance

Before you start a construction business you need to determine what contractor licenses are required in your state or area? Most states require a general contractor’s license. You should ensure you meet the requirements to obtain the license. Some states may not require a license but ask you to register with a state board or the local Department of Labor. 

Federal law requires permits for certain business practices. For example, if your business operates an oversize or overweight vehicle, you will need a special permit. If you are transporting building materials or heavy equipment you may need a federal license or permit

You may also want to consider liability insurance for your construction business as well. It protects your business assets and will protect you from any lawsuits or injuries. Liability insurance can give you peace of mind. Some lenders may require you to have it. 

Implement Good Systems and Processes

Once you are ready to hire employees, think about using technology that will help you manage your team. Using a construction time clock app like ezClocker will allow you to create work schedules for your employees. You can also assign employees to a specific worksite. In addition, your employees can clock in and out from anywhere.  It also offers GPS verification so you can ensure they are at the job site when they clock in and out. Also, employees can view their schedules on their phones or computer whenever you make changes. 

As a contractor, you should also think about how you will perform billing? Will you be using a job costing software to track expenses? What systems are best for contractors to collect your fees?

Also, think about processes you should develop to perform good quality of work. Think about what measurements or steps should be written down as a process to ensure all employees follow required guidelines. 

Hire Great People and Grow Your Construction Business

Running your construction business will take planning to determine how big you would like your business to grow. Once the word is out, you will start getting more clients and you may need to hire employees. Check references and make sure they will represent your brand well.  

Your business will grow when you are referred by others. Be honest with your business practices and intentions. One issue some may have is the time given for construction projects doesn’t match what actually happens. When estimating project times, think about weather delays, equipment rentals, city inspections, and any other issue that could occur. Write estimates of how much a project will cost and how long it will take to be completed. Do not underestimate your time. 

When you leave a job with a client, you want to know they are pleased by the services you offered and the work you performed. When they are pleased, you will receive further referrals. Once you start receiving referrals your business will continue to grow. 


Author: Kimberley Kay Travis

Kim Travis has over 20 years of experience in business, human resource management, and leadership roles. She has specialized knowledge in employment law, employee relations, recruiting, management consulting, small business growth, leadership development, workplace safety and health programs, and writing business content.


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