How to Start a Construction Business
Starting a construction business can be unchartered territory for many. For a construction business startup, steady investment and intermediate-scale operation are required right from the beginning. Issues with cost overruns, the acquisition of land for construction, and setup can be the initial challenges. Many steer away from the thought of owning a construction business with cumbersome funding, ownership, and bidding involved in the process. Despite these friction points, starting a construction business can have several benefits.
For starters, you don’t need any degree or specific qualification to get started. You can earn a good profit and be assured of a good source of income. Building something tangible comes with its own work satisfaction and interesting opportunities. If you’ve set your mind to start your own construction startup, the real question is - how to start a construction business.
Well, building your momentum in the construction industry post-COVID-19 can be tricky. Changing business and economic dynamics have made the supply and demand ratio skewed this year. However, there are other metrics of technologically driven and efficient spaces that trigger a growth phenomenon despite the reduced volume of work.
Construction is no longer merely the traditional brick and mortar model that it has been for decades. The impact of “digital” in construction can be seen with a technological breakthrough in the mindset for construction. So, it is fair to say that the construction industry is advancing into a new era, and if you’re thinking of jumping into the business, now is the time. Now, let’s have a look at what all you need to do to get your ducks in a row.
An Ideation Checklist for a Construction Business Startup
Construction business is one that you simply can’t drive alone. Even on a small scale, a skilled team is a must before you can think of your startup setup. Here are some things that you need to consider on the ideation table while thinking about your construction business setup. Let’s get started with a brief comprehensive ideation checklist:
1. Conduct a thorough Market Research
For a construction business, the analysis of the current market and industry trends is instrumental. A construction startup is heavily dependent on the current status of the market. Thus, hiring a professional to iron out this aspect can be great. Before you get someone on board, conduct your own independent market research to get an idea of the basics.
A survey of ongoings with the SBA, and U.S. Bureau of Labor Statistics, can give you a fair view of the tools and dynamics used in the construction business industry. You can go through construction statistics from your local industry publications to gauge the scenario for your town or city.
Why is this important? Having an idea about different opportunities locally, hires, hours of operation, and profit margins can give a clear picture of what to expect for your own construction business.
2. Shortlist your services, initial budget, and identity as a business
The next thing to check off your list is an estimate of what you’re business is going to be like. This includes a shortlist of the exact services that you’re going to offer, such as design/building services, construction, build-outs, renovation and expansion services, and many more.
Your initial budget, cash flow forecasts, projected balance sheet statements, and debt obligations also need to be considered. A proper budget ensures your loan processing and funding are in sync with your equipment purchase dates, mortgage issues, property leasing, and other purchases made to set up your business.
With basic requirements shortlisted, you can proceed to think about your brand identity and how you’re going to function as an entity. A clear-cut business identity can help you decide how you’re going to set your business apart from the rest.
3. Organize location, equipment, and company office requirements
With a business approach in mind, you also need to start organizing locations for your operation. For an intermediate-scale construction business, you might even require multiple locations for warehousing and office operations separately. A different set of employees and managers will also be required for different on-site and off-site departments.
Start looking for a suitable location for your primary company office and the requirements associated with it. Equipment and raw materials also need to be sourced from reliable vendors. For storage and maintenance of raw materials, another location can be required, especially if you’re going to undertake quick renovations and fixer-uppers for your clients.
Finding a good location that is within your budget, reliable vendors and suppliers, and narrowing it down to your exact equipment needs and other requirements can take some time. So, get started on thinking about these as soon as possible in the ideation process.
4. Make a structured Construction Business Plan
The next item on your checklist is your construction business plan. Why is this on the ideation checklist? Well, because how you plan your prospective startup has a lot to do with the significant initial workflow. Your business plan should include everything, right from workflow plans, budget estimations, team roles, legal permissions, and everything else that you can think of.
A business plan becomes especially significant for a small-scale construction business as many operative teams are likely to be involved even on a small scale. The on-site and off-site executives can use really operative better with a singular updated plan for all protocols. Your construction business plan will also prove to be the singular official document that will be needed for obtaining funding in the initial stages and legal permits and licenses at a later stage.
Many business owners put the business plan on the back seat simply as they don’t know where to begin. Check out this comprehensive Construction Business Plan Template to formulate a properly intelligible and efficient business plan.
5. Register Your Business
With a solid plan and all other requirements sorted, you need to register your construction business before you can begin with official operations. Decide on the kind of business entity your want to register as, and then register with your state and local agencies.
This is when you’ll also need to get your Employer Identification Number(EIN) which is instrumental for tax purposes, hiring any employees for your business, and also to apply for licenses and be able to use and open an official business bank account.
There are bound to be some hiccups in this process as well. Businesses often go back and forth with deciding on whether to register as an LLC or a corporation. You will also need a lot of paperwork organized to apply for registration. Since a lot of other steps, such as legal permits, and hiring require registration as a prerequisite, it’s better to get your business registered with a good window at hand to get other requirements going.
6. Ensure legal permits, loan sanctions, insurance, and licenses
If you’re looking into different funding options and loan sanctions for an investment in your business, the timeline can be significant. At times loan processing can take longer than you expected, and the rest of the plan goes haywire. Ensure your loan is applied for and processed with a good time margin, and funds are at hand ready for use as per your required timeline.
Another source of friction at crucial stages of the business can be any form of non-compliance with the law. With varying sizes and construction laws, you can never be too sure about when you might hit a legal bump with your business operations. Thus, ensure all legal location permits and licenses are obtained.
You might need a General Contractors’ License or a Specialty Contractors’ License along with insurance policies depending on your State Contractors’ Board or the Local Department of Labor.
7. Build a workforce, transport affiliations, decide team roles, and get your business started!
Proceed to build your workforce, hiring employees for different roles and ensuring the workflow is streamlined. You will also need transport affiliations to carry materials to the construction site and other peripheral services that you need to think about in advance.
Ensure team members and managers are clear with their roles, on-site or with client-relationship management in the office. Market your business both digitally and locally to acquire clients and get started with your construction business.
Thus, getting starting with your own construction business entails much more than you would think. With investments and legal precautions on the forefront, it is important to have everything in order. Unlike other businesses, you can’t really go back on a project here or shift it.
Any legal or infrastructure loopholes can usually cause massive losses. To avoid these issues, a well-thought-out plan can be a game-changer. At Upmetrics, you can find several niche business plan templates to make sure you’re prepared for every minute aspect. Start planning today to build your construction startup to a strong and steady business!