How To Start A Construction Company

Rome wasn’t built in a day, and this old saying couldn’t be more relevant than when it comes to building a construction company from the ground up.

Construction is a difficult industry to break into. Although the global construction market is expected to grow to $8 trillion by 2030, only 26.6% of companies make it to their 10th year in business.

But with high risk comes high reward – which is why it’s crucial to do your research before starting a construction company. Here are a few tips to ensure your new construction business not only survives, but thrives.

Research your local market

Market research is the first step toward the start of a construction company – and one that’s often ignored.

Look into each of the construction companies operating in your area and decide whether another one makes sense and would stand out against the competition. After all, an area that’s oversaturated may be too tough to consider breaking into.

Research how many construction companies there are, what they specialize in, their price ranges and their customer bases. To do this, you can use the U.S. Small Business Administration, which provides hard data on clients in an area and business markets. You can also easily use a search engine like Google to research your potential competitors and take a deep dive into what they offer.

Once you’ve determined that a construction company is a good business option in your area, your next step is to develop a business plan.

Put together a construction business plan

One of the most important things you should do when starting a new company is to put together a solid business plan.

Outline your company goals, vision, mission and key performance indicators. Make sure to also create a financial plan that includes your projected revenue, expenses and profits.

Determine your niche, the service you’ll provide, the type of jobs you’ll bid on, what your target market is, the number of employees you need to start with and the marketing agenda. These are essential to starting off on the right path.

Use online tools to help build your business plan because they typically provide ready-made templates and use cases that help put everything together the right way.

Decide on a legal structure for your business

Once you have a business plan in place, you’ll need to register the business and make it legal. The legal structure you choose determines things like tax benefits, legal benefits and personal liability protection.

There are several legal structures to choose from, including sole proprietorship, partnership, limited liability company and company. However, all of this depends on the state in which you’re opening your business. Therefore, legal counsel is highly recommended to ensure your business is protected and compliant.

You can also take the extra step and register your business at the federal level. This allows you to trademark your business with the United States Patent and Trademark Office.

If you don’t know where to start, software like LegalZoom and Rocket Lawyer can help you choose the legal structure that best suits your business. Through this software, you can access the resources needed to educate yourself on the legal side of things.

Find an investor or apply for a loan

Unless you have a hefty sum of money in your bank account, having an investor back your business is a great way to finance it and kick things off.

Start by making a list of 30 to 50 potential investors who might be interested in your business. Then get in touch and schedule a presentation with them to go over your business proposal.

AngelList and LinkedIn are two great websites to use for researching investors. Networking and reaching out to personal contacts is also a good idea, as personal reference goes a long way in business.

Alternatively, opting for a contractor mortgage is a good way to start your business without relying on a private investor. If you’re thinking about opting for a mortgage, make sure you have a down payment of at least 10% ready and that your accounts are all in place. This can determine whether you get the mortgage.

Obtain licenses, permits and insurance

When you start your construction company, you’ll need to obtain the necessary licenses, permits and insurance.

Depending on the state you’re in and the type of construction company you plan to start, you’ll probably need permits at both the federal and state levels. For federal permits and licenses, you can visit the Small Business Administration website to learn more about what exactly you need, or you can consult legal counsel for additional help.

At the state level, you need to check local zoning ordinances, as they ban certain businesses from operating in an area. In addition, check your state’s website or your local county courthouse to make a list of all the permits and licenses you need and make sure you’re legally covered.

Construction is a risky industry, so insurance is a must. Accidents occur, so make sure you’re covered for all possible liabilities. In addition, most states require construction companies to have valid workers’ compensation insurance to cover workers, as well as professional liability insurance, builder’s risk insurance, auto insurance and general liability insurance.

Embroker and Insureon can help you get quotes from multiple insurance providers and the protection you need without a lot of hassle.

Grow your business

As your company grows, you’ll need to hire more people. Hiring qualified and reliable workers is key to ensuring your business is successful.

In addition, communicating with clients, managing their expectations and meeting deadlines all contribute to the longevity of your construction business. A good reputation and word-of-mouth recommendations go a long way and are essential to locking in your next big project.

Another important thing to consider is to ensure everything is in writing, including all agreements with clients and employees. This not only protects your clients, but also the reputation of your company.

Using project management software like Buildertrend is a great way to keep all your job details in one place. You can update your clients and employees on job progress and use reporting to avoid surprise delays. After all, the more accountable you are, the higher the chances that a client will use your services again.