The views of this article are the perspective of the author and may not be reflective of Confessions of the Professions.
The construction industry has one of the highest rates for startup companies in the country. The industry also has the highest rate of company failures at 63 percent. Construction companies fail for many reasons, but often they fail due to the owner’s lack of business knowledge, low startup capital and a misunderstanding of the market. These tips can not only help you reduce your risk of failure, but can also help you build your business from the very beginning.
Understand the Market
The first thing to do when you decide to start your own construction business is to research the market. If the area is already saturated with this type of business, you may need to shift your focus to an area that does not. It is possible to create a successful construction business even if the market seems saturated, however. Look at what the companies offer and where most of their jobs are located. Tailor your construction company to meet needs other companies do not. For example, if the majority of the companies in your area focus on constructing new homes, focus your company on remodels or home repair jobs. If your area has a large elderly population, you may find that a construction company that focuses on installing storm doors, replacing flooring or doing small carpentry jobs will be very successful.
Once you have a feel for the market, create a business plan. The plan does not have to elaborate, but it can help guide you as you grow your business. The plan should include how you will structure and manage the company as well as the services you will provide. If you plan to bid on larger jobs, include the types of jobs that you feel you will be the successful bidder. The plan should include your target market, how many employees you will have to start as well as in the future and how you plan to market the company. You will need to include financials such as how much you need to start up the company and what you will need annually to maintain the business. The Small Business Association as well as your local Chamber of Commerce can help you create the business plan if you are unsure how to go about doing so.
Registration, Licensing, and Insurance
Once you have the business plan in place, you will want to register your business with the government. This is often done with a simple form. You will also want to get a federal tax identification that will be used to file income taxes. Contact your local and state offices to learn what licenses you will need as a construction company. Talk to an insurance agent about coverage for your company as well. If you have employees, you will need workers’ compensation. You will also want liability coverage should something go wrong on the job site.
You will need funding to get your business off the ground. Your business plan is a great way to start the process should you need to borrow money for tools, equipment or vehicles. One way to save money when you start the company is through used equipment buyers. Purchasing a used forklift or backhoe will save you money as you get your company off the ground. It is also important to remember that projects will require funding in order to purchase supplies. In addition, you will need a plan to address clients who pay late or refuse to pay which could impact your own cash flow.
Overall, the best tip for building a new construction business is marketing. Often, marketing in the construction industry is word of mouth, so building strong loyalty and an outstanding reputation is the best way to grow a small startup construction company into something much bigger.
About the Author
Meghan Belnap is a freelance writer who enjoys spending time with her family. She loves being outdoors and researching new topics that help to expand her horizons. You can often find her buried in a good book or out looking for an adventure. You can connect with her on Facebook right here and Twitter right here.
