The construction industry is a high-growth industry even though the pandemic took a toll on the economy. It recovered many of the lost jobs from 2020 and is poised to have a remarkable run in 2022.
It makes it a great time to start a construction business. You do have to learn how to start a construction company. It’s not as simple as buying a truck and telling people you’re in business.
It takes a lot of investment and time and resources to get a construction company off of the ground. Don’t let that intimidate you because this article has you completely covered.
Keep reading to learn what it takes to start a construction business from the ground up.
Construction company formation process
1. Choose a Specialty
A niche helps you set your construction business apart from every other construction company. You can work in residential construction, commercial, and institutional buildings.
Do you have a background as an engineer? Infrastructure projects like highways, bridges, utility, and wastewater systems are something to consider.
Your construction business can also work on power plants, manufacturing structures, mills, and chemical plants.
Within each area lies a specialty. For instance, if you work in residential construction, you can specialize in new homes or historic preservation projects.
2. Identify Missing Attributes
Once you have your niche down, you’ll want to identify what you need to get the company off the ground. You’ll need things like construction equipment, financing, licensing requirements, and office space.
This is the time to identify your skills and your strengths. What are your strengths and weaknesses as a business owner? You might already have government contacts, which can help you when you bid on infrastructure projects.
You also want to identify your role in the company. How much of the work will you do yourself? Will you do the bidding and business development? How will you manage employees?
Getting these decisions out of the way now makes it easier to take the next steps and form a vision for your business.
3. Write a Business Plan
The business plan is the document that drives many of your decisions. It’s a necessary document to fund your business.
This is where you research the construction market in your area. Now that you chose a niche, you need to learn about the competition.
Take a look at the future of your area, too. Most cities have a 10-20 year plan. This accounts for population growth or decline. How does that impact your niche?
An area expecting an influx of people in that span. There could be large corporations setting up in the area. That requires new housing, expanded infrastructure, and much more.
These are the main opportunities for your construction business.
4. Learn the Legal and Regulatory Environment
The construction industry is regulated, and for good reason. It’s one of the most dangerous industries, and a lack of oversight is catastrophic.
You have to check with your state’s construction licensing board for specific requirements. Find out what the insurance and bonding requirements are.
Become very familiar with local building codes and OSHA standards. Failure to comply results in penalties, fines, and bad PR for your business.
5. Finance the Construction Company
In the business plan, you laid out your startup and operations costs. Those costs are probably more than you have aside right now.
You’ll need to obtain financing for the business. There are several ways to fund your business. You can ask friends and family to chip in. You can get an SBA loan, local grants, or a business loan from your bank.
Be prepared to present your business plan with your financial statements. Lenders want to know that you have the resources to pay the loan back.
Read the terms of the loan carefully. Some of these loans as for collateral if you borrow a certain amount of money. That means if you fail to repay the loan, the lender can seize the collateral.
Finalize the loan, and then buy construction equipment for your business. You should be able to shop parts for construction equipment. It’s good to have parts on hand in case your equipment needs a repair.
6. Register the Business
Don’t forget to register your business to make it official. This is separate from getting your contractor’s license. A business license tells the corporate division in your state that you are a legal business.
You will be asked to choose a legal entity for your business. Make sure that you choose the right one for your business. Consult with a business attorney and accountant.
7. Market the Construction company
You’ve made it this far and it’s time to get to work. You have to tell people about your construction business now that you’re legally able to operate.
This is why picking a niche is so important. It’s much easier to narrow down your customer base and find them. Companies seeking government contracts don’t need to spend time on social media. They need to look for projects to bid on.
However, if you target residential customers, you do need to have an online presence. You can show off your projects and build a portfolio.
No matter what your niche is, you definitely need a website. It’s how people will find your business and decide if they want to work with you.
How to Start a Construction Company That’s Successful
Starting a business is never easy. If it was, everyone would do it. Starting a construction company is a completely different challenge.
You have to contend with legal issues, employment issues, and it’s expensive to start. The tips in this article took you through the steps to learn how to start a construction company.
Put them to use and you’ll have a successful business. For more tips and insights, be sure to check out some of the other great articles on this site.