Due to the growing population urbanization is increasing. So, there is a need for more infrastructure for people in cities and other areas. For example, shelter is a basic human need to survive. Here comes the role of construction in our lives. It is essential for fulfilling basic human needs like shelter. Therefore, construction is a necessity for human development.
The construction industry is a growing sector that helps a country grow economically. This also builds infrastructure and as a result, creates jobs. Are you planning to try your luck in this industry? Or simply want some insights into the construction business? If so, in this blog, we will elaborate on how to start a construction business and succeed. Before doing that, let’s explore why you should enter this business.
Why Start a Construction Company?
- Great Demand and Profit Margin– This business will always be in great demand because of the increasing demand for residential and commercial buildings. As the demand increases profit margins also increase. One can easily earn ten to thirty percent profit margins per project.
- Market Size– Estimated globally, the market size of the construction business is worth around 12,634 billion dollars. This included commercial, residential, and infrastructural construction. Analysts expect the industry to grow at a rate of over 6% compounded annually during the years 2022 to 2030.
- Job Creation– You create job opportunities for laborers and other skilled people indirectly by starting a construction business. This activates economic activity and thus benefits the local government. Eventually, you are participating in the economic growth of your country.
8 Steps to Start a Construction Business
Thoughtful planning, research, and execution after complete preparation make a business successful. Below is the guide on how to start a construction business to help you.
Step 1: Select Your Niche and Market Research
The construction business has several parts like residential, commercial, or renovation. You must have a clear vision to start a business in one niche or provide all the construction-related services. For this, you must ask yourself a few questions:
- Do I have complete knowledge of this niche?
- Does this niche interest me?
- Is this niche in demand?
- How much capital would be needed in this type of business?
- How much profit can my business earn in this niche?
- What kind of competition and hurdles would I face in this business?
You will have a definite answer for what you want to choose as a niche for your business. Along with defining your niche, one must research the market for competition and growth potential. You should understand the preferences of your future customers along with adapting to the new trends in the market.
Step 2: Create a Business Plan- A Roadmap to Your Success
The business plan should include every step you’ll be undertaking before the business launch. Realize the objectives and goals that you want to achieve in your business journey.
- What do I want to attain from this business and how will you do that?
- Where do I want to see yourself as an entrepreneur in 10 years?
- How will I make my company stand out?
Answering such questions can help you define your goals and objectives. This gives you motivation to grow and achieve new heights in your business.
Plan all your operational and marketing strategies before venturing into the business. This would assist you in planning for your financial resources. After having a full project proposal, you must write plans for your business expenses. Would you require a bank loan or start a construction business with your own capital? You can look for other options to gather finances for your business early.
Step 3: Register Your Construction Business to Get Permits
Starting any business legally following the norms of local authorities and industry is always fruitful. You may require the following permits to start a construction business.
- Business License– A regular business permit to start a construction business.
- Contractor’s License- You need this permit issued by a state or local authority to secure contracts in the construction business.
- Building and Zoning Permits– These permits are required to start every project ensuring you follow all the local zoning laws.
- Electrical and Plumbing Permits– These are needed for electricity and plumbing fittings in the buildings.
- Environmental Permits– This is required when you carry out a project that may affect the environment.
- Occupational Safety and Health Administration Certification– A necessary permit to ensure the safety and security of the workers at a workplace.
- Sales Tax Permit– A permit required for all businesses that sell products or services.
Insurance is also a requisite to start a construction business. Apart from this, you must contact the local authorities about other mandatory certifications to start a construction company in your state or country.
Step 4: Secure Funds for Your Construction Business
After calculating the start up costs, you must decide how to meet your financial requirements. If you do not have enough capital, you must explore other financial options. You can apply for bank loans and to increase your chances for a loan approval, you must:
- Present a solid business plan
- Provide collateral if needed
- Enhance your credit score
However, the amount and interest rate of the loan depends on several factors such as location, business type, bank, and credit score. Here are a few loans available to start a construction business.
- For the construction business, you can apply for $50,000 to $ 1 million at a rate of 7% to 30% for 3 to 10 years.
- You can also apply for equipment financing of $5,000 to $500,000 at a rate of 5% to 20% for two to 7 years.
Note– The above data is estimated. Figures may vary depending on the state, country, or lender.
Other than banks, you can source your funding from:
- Private lenders
- Credit unions
- Government funding programs.
In addition to the startup costs, you should also be aware of ongoing expenses for projects. Sometimes, your client may not pay you in advance or on time. Here, you may face difficulties in your cash flow. Therefore, you must secure some emergency funds for such unavoidable and unexpected situations.
Step 5: Risk Management and Asset Protection
After securing funds and permits, it is time to think about the insurance of your workers and business. Construction jobs pose many risks, therefore, one needs to ensure he is adequately insured.
Being the owner of a construction business, you must write down all the risks that may occur. You must have a plan in case of any mishappening at your business or construction site. For this, you must secure workers’ compensation insurance to secure your workers’ future.
Also, you may require general liability insurance and other insurance related to your business. Therefore, you should plan sooner to secure your liability and insurance as it may consume more time than expected.
Step 6: Make a Team for Your Construction Company
It is said that qualified and hard-working employees lead to a successful business. Therefore, you must hire experienced staff for administration and labor work.
For this purpose, you can announce vacancies in your firm via social media or newspapers. You can also invite qualifying people for walk-in interviews and select the ones aligning with your requirements after the interviews.
Step 7: Contact Suppliers for Materials and Equipment
Constructing a building requires cement, concrete, bricks, roofing, and electrical materials. So, you must build connections with reliable suppliers so that you can buy construction materials conveniently anytime at the lowest prices.
A construction company also requires construction tools and vehicles. You must invest in quality equipment and materials to operate your business smoothly. Additionally, you need robust project management and accounting software to run administrative processes in your construction company.
Step 8: Market and Launch Your Construction Business
An efficient marketing strategy is needed for your construction business to reach more and more people and establish an online presence to make your business successful. For this
- Create a Website for Your Construction Business: You need a business website for your customers who’ll search and contact you on the search engines. You should follow effective SEO strategies to make your business visible at first on search engine result pages. Regularly share blogs, videos, and photos relevant to your construction company on your website.
- Social Media Marketing: Social media has a wide reach globally. By leveraging these platforms you can easily connect numerous people in a short time. You should post relevant content such as images and videos on your social media accounts. You can add testimonial videos from your clients to build trust among prospective clients.
A professional digital marketing company can be helpful for the online marketing of your business. A marketing agency can use various fruitful techniques to advertise your business online and generate leads for you.
- Printing flyers and advertising in newspapers and billboards can also be effective in publicizing your construction company.
After all the recommended preparations, you are all set up to launch your business according to the plan. Once you venture into the industry, analyze your progress and always adapt to the challenges to grow.
How Much Expenses Do You Need to Start a Construction Business?
Starting a construction business requires a fortune. Here are some estimated expenses for this.
- Licenses and Permits– $1,500 to $5,000
- Insurance Costs– $6,000 to $15,000 (Including Liability, workers’, equipment insurance, etc.)
- Tools and Equipment– $80,000 to $300,000 (Eg. Bulldozer, trucks, trailers, and other smaller equipment)
- Offline Office Setup Costs– $15,000 to $30,000
- Online Marketing and Advertising– $5,000 to $15,000
- Employees’ Salaries– $50,000 to $100,000
- Other Miscellaneous Expenses– $5,000 to $15,000 per year
Therefore on calculating all the costs and expenses, initial start up costs for a construction business are about $200,000 to $500,000. However, these estimates may vary according to the country, state, location, and local authority’s norms.
Also Read – How to Start a Security Guard Business: 7 Steps to Shield Success
Final Words
Starting a construction business can be profitable due to its ongoing demand. Also, this business provides entrepreneurs with the possibility to grow and innovate in other business sectors. However, newcomers can face hurdles in this business. But, those can be surpassed using various business strategies.
Connecting with a reliable digital marketing company, like New Traffic Tail, for online marketing can bring positive results for your construction company.
Surely, you must have gotten an idea of how to start a construction business from this blog. If you have any queries regarding the topic, feel free to write them in the comments section below. We’ll appreciate your participation. Best of luck with your venture into the construction business!
FAQs
Q1: What challenges can I face while starting a construction company?
You may face challenges regarding funds, material supplies, and industry regulations. But, you can easily succeed by strategically putting a little more effort into your business and services.
Q2: What insurance do I need to start a construction business?
Some of the required insurance are
- Liability Insurance
- Workers’ Compensation Insurance
- Property Insurance
- Environmental Insurance
- Builders Risk Insurance
You can also contact local authorities to know about other necessary insurance for your business.
Q3: How can a marketing agency help my construction business?
A digital marketing company can help you build a strong online presence for your construction company. It will manage your social media accounts and business website to make your business popular and grow.
