Most entrepreneurs would agree that it is so easy to allow fear and self-doubt to cloud the decision to launch a new business, especially if it’s a construction business requiring substantial start-up capital. However, some 600 small business owners throughout the US were polled, and it was found that at least 30% of these business owners were able to start their business with less than $5,000 as capital. And three business types led the list of ventures that required the least start-up capital: online retail, accounting, and, you guessed it: construction.
Read further for other things you need to do or have in order to start a small construction business of your own.
7 Things to Do to Start a Small Construction Business
Your Business Plan: Establish your business goals, including strategies and plans for every stage through the whole implementation process. Add details like funding and time frames involved in meeting every goal.
Headquarters: Yes, you can start working out of your home, but eventually, you will want (and need) to move into a more official business space. Aside from legitimizing the business, an official, fully-dedicated business space will be required to house staff, office equipment, and files, and ideally, parking or storage for heavy equipment and vehicles. Also, an office shows commitment to the business.
Paperwork: Any professional operation is necessarily compliant with laws, regulations, and industry standards. Secure all necessary permits, licenses, registrations, and certifications mandatory for a construction business. Also, take note of your tax requirements and insurance responsibilities. These vary by locality, so please do your research. Hire an accountant and lawyer, if needed.
Financing: Secure the funds you will need for rent, lease, equipment, tools, staff payroll, marketing, etc. Do make sure that funding for your capital expenditures and initial operating expenses have been secured before actually bidding for your first project.
Staffing: Decide if you would like to hire full-time employees or start with the contractual, as-needed staff. As a start-up, you might be served better to begin with per-project contractors as this allows you flexibility and lower cost. At the very least, though, consider hiring a full-time assistant who can support you as you establish your company in its early stages and who you can train down the line, as well.
Networking: Open accounts and credit lines with a number of suppliers, as well as establish good professional relationships with other contractors. This network of professionals can support you in projects you may need help completing and vice versa. Also, this opens up opportunities for referrals—something you will need as you establish yourself in the industry.
Marketing: Are you going to rely on just signage on your job sites, handing out calling cards, and word of mouth? Or would you like to explore TV, radio, and the worldwide web? At this point, start thinking about branding, too. Start with a unique business name, logo design, and deciding on your company’s identity. When you have created your brand, then you can go full-blast on your advertising with posters, brochures, or a website. This is one area you should allocate more funds for. Experts suggest allocating more for marketing than you think you actually need.
The Costs of Starting a Small Construction Business
The average cost of starting a construction company is somewhere around $41,000. The minimum average startup is about $8,400, while the maximum average is around $75,000.
This does not yet include the heavy equipment that you will need to actually start constructing. In general, it is more cost-efficient to consider investing in construction equipment through one-time purchase if you will need it for 65% of the entire project duration. Owning the equipment ensures its availability to you. Remember that equipment leasing companies work with multiple contractors simultaneously. There is a likelihood that the equipment you require for a particular project might not be available to you just as you need it. Think of high-priority contracts with stringent completion deadlines. Also, if you own your construction equipment, they will be at your disposal 24/7, which means you can do emergency or off-schedule work or accept on-the-spot contracts.
Construction equipment sellers often offer financing plans with attractive interest rates. Remember to do a cost-benefit analysis of buying your own equipment vs. leasing based on your business goals and strategies.
The construction industry continues to thrive. The rapid pace of advancement in technologies, business methods and models, and growing population bring the continued need for infrastructure development, whether industrial or residential. Starting your own construction business is indeed an exciting and potentially lucrative investment.