How to Start a Construction Company

Jun 3, 2022 12:00:00 AM
A construction company is one of the few businesses that you can see go from a brand-new micro-enterprise to a major business in just a few short years. However, while it’s possible to grow a construction company quickly, business principles still apply.
There are also some specific challenges you need to know about when you’re wondering how to start a construction company. Here is what you need to know about the process.
 

1. Research Your Market

Most people who start construction companies do so because they have some practical experience in the field. It’s common for people who have worked as electricians, tilers or plumbers to start their own business in the same field.
 
However, while you might know the trade, you still need to do market research when you’re figuring out how to start a construction company.
Investigate how many competitors you have, and study them to find any potential gaps in their services that you can take advantage of as you grow your own business.
 
If you can, try to contact a few of your competitors to get budget prices for various services you plan to offer. This will give you an idea of what the pricing for those services is like in your area, which makes setting up your construction estimating software easier.
 
Speak to your network too. Find out what they like about other contractors in the same field and what they would like to see done differently. Find out how often they use that kind of service and what they think of the pricing they’ve had in the past.
 
The more you know about your market while you’re figuring out how to start a construction business, the better equipped you will be to hit the ground running!
 

2. Write a Business Plan

Most people who are wondering how to start a construction business are practical people who don’t love to do things like business plans, but this is a crucial step in the process. It will help you to clarify your ideas, create an honest snapshot of where you are right now, and help you to brainstorm ideas about things you might not have considered.
 
There are many businesses planning resources out there that you can use to do this, so don’t worry if you’ve never tried to write a business plan before. You can try online resources like Bplans or LivePlan. Many banks and small business incubators, and organizations also offer templates and other business planning resources that you can use to create a plan.
 
If you are concerned that you’re not the best writer or that you don’t know enough about business to write a business plan you can show to someone else, don’t be. Unless you are planning to apply for financing for your business, you don’t have to show this document to anyone. It’s simply your own roadmap to how to start a construction business.
 
If you are planning to approach a bank or another type of lender’s small business program, you should know that in most cases, these organizations are used to working with new companies. They will usually offer assistance in preparing your business plan or can refer you to resources that can help.
 
shutterstock_153557804-1

3. Register Your Business

If you are going to be running a construction business after you work out how to start a construction business, you need to have the correct legal framework for that business. That means you need to register the company and get a business license.
 
While you could choose to operate as a sole proprietor, it’s usually safer to incorporate your business. This ensures that your business is a separate legal “person” and insulates you somewhat from the company’s financial and legal dealings.
 
There are several DIY options to register a business online, or you could contact your local government to ask about registering your business.
 
You will need to choose a name for your business when you register your business. We’ll get to marketing in a moment, but it’s a good idea to find out if you can get the corresponding domain name for your website. You can use something else that is related to your business or industry, but for branding purposes, your business name is ideal.
 
Once your business is registered, you can also set up a separate bank account for the company, which makes tracking your earnings a lot easier.
 

4. Get Licensed!

When you are starting a construction business, there will probably be several licenses and certifications you will need to get and keep current.
 
Contact your city’s building department to find out what kind of licenses they require construction companies that offer your type of services to have, and make sure you get them in place before you start operating.
 
Certain types of certifications might require you and your team to complete specific training courses, so you might need to factor that into your planning. There is a useful resource to learn more about licensing and permits on the U.S. Small Business Association website.
 

5. And Insured

While you’re figuring out how to start a construction company, you also need to make sure you have the right insurance for the business you are going to run. You will definitely need to have Worker’s Compensation for your employees, and most construction companies are required to have some kind of public liability insurance.
 
You will also have to have special insurance for your construction vehicles, possibly including some of the equipment you use.
 
It’s a good idea to speak to an insurance broker that specializes in the construction industry to make sure you have everything you need in place. The last thing you want when it comes to insurance is to discover you need it after something happens!
 

6. Set Up Business Systems

Many construction businesses start without first setting up their business systems. Then they discover that they are growing too quickly to keep up, and there is no time to get it done!
 
It’s much better to do this before you start operating so that you don’t have to try to squeeze it in when you are already busy. Here are a few things you want to take care of before you start operating:
 
Get Your Accounting Software Set-Up
Hopefully, once you start operating your business, you will start invoicing customers almost immediately. So, it’s a good idea to set up your accounting software before you start operating so you have a method of creating those invoices. Many small businesses find that QuickBooks is a good option, and there are some construction-specific elements of the package that you might find useful. There is also a cloud-based version that you can access from anywhere, so you can create and review invoices and other financial documents and processes from anywhere.
 
There are many other accounting packages out there too. Some, like Wave, are free, while others have a small monthly fee to use the software. However, for the level of convenience and to stay up to date with your business accounting, it’s absolutely worth it!
 
Create Health and Safety Plans and Processes
Aside from just getting worker’s compensation for your employees, you will also have a legal obligation to keep them safe when they are working for you.
 
There are hefty penalties that might come into play if someone is injured or killed on your job site and you were found to be negligent in protecting them. So, make sure you have all the right processes in place and that you have the right kind of personal protective equipment for your employees.
You might also need to train one or more people in first aid and other important OHS skills, and you will need to keep records of all health and safety training, accidents, incidents and more.
 
Health and safety consultants can help you to set this up if you don’t know how to create these kinds of processes, or you can find more information on the Occupational Health and Safety Administration website that is run by the government.
 
Get Your Estimating Systems Set Up
One of the most significant factors in not only figuring out how to start a construction business but how to start a successful one is finding the right residential construction estimating software.
 
You will want this to be detailed but easy to use. You need something that is flexible and that can adapt as your business grows and changes.
You also need a user-friendly construction estimating software that includes automation tools, so you can get your estimating done faster and more accurately.
 
Up-to-date pricing is also a challenge for most construction companies, so make sure you find something that solves the problem of keeping current on all of your pricing, so you don’t have to reinvent the wheel every time you quote.
 
CostCertified was built to do all this and more. It’s construction estimating software like nothing you’ve ever seen before, and it’s an affordable method of setting your estimating system up right, right from the start.
Many companies find that trying to make the switch to new systems once they are established is a whole lot harder, so it makes sense to get set up properly right from the start.
 
Don’t Forget Project Management!
When you’re working out how to start a construction business, you need to remember that while good estimating will get you the job, good project management will help you to make more money.
 
So, make sure you also figure out how you are going to manage your projects. There are many tools and programs out there that can help you to track your progress on various jobs. There are also digital timecard platforms that your people can use to track their time on each job. That is very useful for billing, to evaluate your estimating processes, and to track your progress.
 
The most important thing is that you have a project management system. Even if it’s simple, in the form of a spreadsheet, a calendar or a whiteboard when you’re starting out, you need to stay on top of the time spent on every job if you want to make money.
 
Choose a Customer Relationship Management Solution
Next on your business set up to-do list is to find a CRM or customer relationship management solution. This is a software package that stores customer information so that you know when to follow up, who has been asking for quotes for a while and more.
 
CostCertified has some CRM functionality built-in, so if you’re going to use it to manage your estimating and quotes, you can use that to track customers too.
 
Find Suppliers, Subcontractors and Service Providers
Finally, before you start your construction business, you will want to find reliable and affordable service providers, subcontractors and suppliers.
 
Ideally, it would help if you looked for companies that offer favorable payment terms so that you don’t have to pay for these items before you get paid by your customers. However, you should also remember that you won’t have any kind of credit track record when you're just starting out, so you should expect your credit limits to be lower.
 
Always try to have at least three suppliers or service providers for all the goods and services you need. This will help ensure that when one can’t deliver, you have alternatives that you can approach instead.
 

7. Start Marketing

You will notice that we’ve got “start marketing” last on our list of steps on how to start a construction business. That’s because, if you do it right, you will start getting inquiries and business soon after you start marketing. Once that starts, you will have less time for everything else!
 
So, once you’ve got all of the other things on the list taken care of, start working on these items:
 
· Design your business cards and get them printed – a print on demand service like Vistaprint is a great option
· Design a company letterhead that you can use for formal correspondence
· Register your company’s domain name if you have not already done so
· Create company email addresses – you need to do this if you want to look professional – using a Gmail or another free email account does not say, “we’re professionals who are here to stay!”
· Build a website for your business – you don’t have to go overboard with your first website – a service like Wix or Yola will work fine, and while there is a small fee to use your own domain, it’s still really affordable · Sign up free for Google My Business and add your business to the Google Map
· Create social media accounts and start connecting with your community
· Tell your network about your business – most small businesses get started via word of mouth, so the more people who know about your new construction business, the better!
 
We’d Love to Help!
Starting a new construction business is exciting, but it’s also quite daunting. We know because we’ve all done it before.
If you’re looking for more information about how construction estimating software like CostCertified can help make the process a little easier, we’d love to show you.
 
Contact our team and book a demo, and find out how you can get your estimating dialled in from day one.