You’ve been working in the construction industry for quite some time now- you’ve honed your craft, gained a ton of experience, and probably even worked your way up to a managerial level. And now you’ve decided to expand your horizons by starting a construction company of your own.
So where do you begin? What do you need to know as a first-time construction company owner?
Starting a company is always a huge step. There’s so much to learn, lots of legal requirements to fulfill, and paperwork to complete. To help you get prepared, we’ve developed this guide for you where we discuss everything you need to know before you launch your construction business.
So let’s jump right in!
Getting started in the construction business
Start with a business plan
Every successful venture starts with a good business plan. A business plan does more than just putting your vision to paper – it allows you to think through the entire business and make sure that the business makes sense financially.
A key part of your business plan is determining how you will run your business ie. the business structure.
A business structure defines how the business will be formed, who owns the business and the legal liabilities of the business.
Some of the key business structures that you might want to think about when starting a construction business include;
a. Sole proprietorship
Starting a sole proprietorship business means that you’ll own and run the business yourself. You can employ workers, advertise and compete for bids with other companies. However, as a sole proprietor, you will be the sole owner and decision-maker.
It’s also important to note that sole proprietorships are not separate legal entities from their owners and do not have limited liability. This means in case anything happens in business your personal assets are exposed to risk.
b. Limited liability company
A limited liability company is a private business owned by one or multiple owners. It offers limited liability to owners, meaning that the owner’s personal assets are protected.
For example, if your firm is sued for damages caused by one of your products or actions, the court will go after the assets of the firm but not your personal property. This, coupled with the ease of setting up the business, makes limited liability companies among the best business structures to form as a construction entrepreneur.
c. A publicly held company
This is a company that is open to investment from the general public. People are free to buy shares in your company and this helps you raise the capital required to move the business forward.
However, it’s a much more complex business to form and is rarely appropriate for new or smaller businesses.
Registering your company
After laying out your business plan and structure, your next step will be to register the business.
Every jurisdiction has different regulations and processes to register your business. Visit your local chamber of commerce to find out the requirements in your locality.
Your company will be registered for tax purposes and examined to ensure that proper insurance policies are set up to protect customers, employees, and any affected parties.
In the US, the registration process is fairly straightforward in most states, requiring a EIN number, proof of insurance, and a registration fee.
Before you start operating, you will need to get local permits and licenses.
Laws on permits and licensing vary from jurisdiction to jurisdiction, so it is important to check with your local government on the current laws on licensing and permits.
You can find the legal requirements for your location online or go physically to the council office.
Some of the requirements you might expect when starting a construction business
- Pass a trade exam
- Pass a general business and law exam
- Show work experience
- Proof of adequate insurance
When you have a good business plan in place and are ready to start the actual work, you will want to make sure that you have internal resources to help you along the way.
This includes finances, equipment, and a good team.
Your work as a construction company will only be as good as your internal resources. So make sure you invest heavily in these when starting out.
3 essential tips for success of your construction business
Owning and operating a successful construction business requires a great deal of patience and perseverance. It’s easy to lose interest and give up due to a lot of setbacks in the initial years.
To help you avoid that here are a few essential tips to remember for the long-haul construction journey
Create a foundation for financial stability
It’s imperative to have a solid financial plan that’s designed to give you a reliable return on your investments.
While this might seem like a basic step for any new business, it can be a lot harder for start-ups, especially for those operating in construction.
The construction industry is highly regulated and has a lot of moving parts.
Building materials, tools, and manpower are all sold on long-term contracts that can have a lot of legal repercussions. This will require due diligence on the part of your business.
Additionally, have a solid financial plan to weather any economic downturns during your first few years in business.
One of the best ways to do this is to establish an emergency fund or take a long-term business loan.
Know what’s trending
As a new business owner in construction, you may find yourself out of the loop when it comes to industry trends.
It’s important to find out what people like and what they want. Get insider information from your suppliers and get to know what people are thinking about at your workplace.
This can help you better formulate your sales and marketing strategies.
You can also engage your colleagues in discussions about business strategies or learn about new technologies you can use to help improve your construction business.
Do your math
When looking for a job as a contractor, make sure you really understand the costs involved and your margins. This will help you dodge projects that are expensive, impractical, or that do not suit your budget.
If you have a vision for your business, it’s essential to research what it will take to accomplish it and what the costs of your actions will be.
It’s easy to get lost in the formalities and administrative details as a first-time business owner. Venturing out in the construction business can also be tough- it’s a cash-hungry industry, highly regulated, and often, very competitive. But with a little planning and preparation, you can set yourself up for success as a business owner in the construction industry.