The construction industry is a massive contributor to the US economy with more than 7.6 million employees and 745,000 businesses. It creates nearly $1.4 trillion worth of structures each year and is one of the largest customers for mining, manufacturing, and various other services. The industry continues to grow to meet increasing demands for both residential and non-residential construction work.
If you’re handy with tools and want to design and build, you should consider starting your construction business. It’s a rewarding way to pursue your passion, while also making a great living. However, you’ll need to be fully prepared before you start on your journey. Note that the construction sector has one of the highest rates of startup failure, so you’ll need to be careful when venturing into your new business.
Read on to learn a few important steps you must follow to build a strong foundation for your business’s future success.
Research the market
The first thing you’ll need to do is research your local market and find out whether a construction company is a viable option in your area. If the market is oversaturated and customers are happy with the current local companies, it might be hard to succeed in the industry. Start with market research and find out how many local construction companies are already operating in your area, what their reputation is, what they specialize in, and how much they charge from painting to building.
This will also help you understand your potential customer base. Kn0wing their age, status, interests, etc., will help you develop a better business plan and give you a competitive edge for when you start operating. In addition, gather information about the construction industry from sources such as the US Small Business Administration, US Bureau of Labor Statistics, Construction Industry Publications and Statistics, and Local Industry Publications.
Write a business plan
Your business plan should establish your goals for your construction business. It needs to include a detailed plan for every stage involved in the process, as well as a timeframe and funding that you will need to meet each of your goals. If you don’t know how to write a construction business plan, you can find a template online to help you create the best business plan for your company. Keep in mind that you’ll have to present your business plan to investors and lenders to help source funding.
That is why you should put your market research to good use and create a winning business plan. The business plan needs to be thorough and include an executive summary, company overview, market analysis, business structure, the products and services you’ll provide, marketing, and a financial plan.
Register your business
Once you have a solid business plan, it’s time to register your business to make it a legal entity. This will provide personal liability protection, tax benefits, and legal benefits. It’s a simple process, the same as registering the name of your company with state and local governments. However, not every state provides them automatically, so you’ll need to register it on a federal level to get your Employer Identification Number (EIN) or federal tax ID. By doing this you can also trademark your business name and logo.
You can register your business as a sole proprietorship, Limited Liability Company (LLC), C Corporation, or S Corporation. Note that registering your business as a legal entity is just one part of the administrative process. You’ll also need to research and obtain the necessary permits, licenses, and certifications to perform different types of work.
Secure insurance
While obtaining licenses and permits, you’ll also need to think about insurance for you and your employees. Given the dangerous nature of a construction job, you need to make sure you’re covered in case of an injury or accident. Any construction even if along the ultra deck, a business owner needs to ensure they understand the possible liabilities involved.
Note that most states and construction contracts will require you to carry valid workers’ compensation insurance. However, you can also consider getting general liability insurance, professional liability insurance, builder’s risk insurance, and auto insurance. Once you’re fully registered, licensed, and insured, you’ll be ready to start thinking about funding and how to grow your business.
Final thoughts
Starting a construction business isn’t a simple process but contractors are usually resourceful and hardworking, so they find ways to make their business work. Note that construction has some of the highest closure rates in the first five years, so the biggest challenge would be to start on a strong foundation and stay successful. That is why you’ll need a winning business plan and a good strategy to grow your business the right way.
