March 05, 2020
How to Start A Construction Business
There are numerous ways to ensure your business has a strong foundation. From market research to developing a solid business plan, failsafe strategies work. They can also assist in avoiding pitfalls that many newer construction companies face.
Why A Construction Business?Starting a construction services business has many lasting benefits. Regardless of advancements in the tech space, the construction field isn’t going anywhere. However, it's essential to realize the advantages in the construction sector to fully appreciate it. Below, we'll review some of the most common benefits of starting and running a construction company.
Benefits of the Construction Sector
- Construction is a consistently in-demand industry. Rising populations and aging buildings ensure consistent growth. The construction sector is growing at a far higher rate than alternative areas. This sector is expected to grow further with retrofit, renovation, and new construction work.
- Opportunities exist for specialization in construction to compete effectively with competitors. While some offer more generalized contracting services, others choose to target more focused work. This allows businesses to streamline production, contributing to both safety and efficiency.
- It's evident that working in the construction industry has a positive community impact. Construction businesses build schools and homes, libraries, and hospitals. They keep roads and bridges safe to travel. The visual appeal of “the hometown” lives on via local construction businesses.
- Growth opportunities are extensive but can happen on your terms. This is because a construction business can start with just a few employees.
Steps To Starting A Construction BusinessStarting a construction business may seem like a massive endeavor. In some aspects, it is. However, when you break things down into more manageable chunks, the mud begins to clear. We have segmented seven primary steps to start a construction company that succeeds long term. You start by performing ample research and due diligence into your local area market. Then, you can write out a construction business plan, ensuring you have actionable steps and a strong mission. Once this is done, you register your business and obtain necessary permits and licenses at all levels. After this, proper insurance is one of the most crucial steps. When you have the foundation and walls set, the next step is to determine how to best fund your construction business. At this point, you should be in a good spot and prepared to operate and grow your enterprise. Below we break these steps out further.
Perform Due Diligence On Your Local MarketFirst, you must determine if starting a construction business is a viable option in your geographic location. Remember, you may live somewhere with saturated construction markets and happy customers. If this is the case, it may be tough to get your foot in the door. To avoid this, it’s essential to start with market research due diligence. Start by determining the number of local construction businesses operating in your area. In addition, assess their niches, costs, and reputations. With this information, you should begin to understand your potential base of customers. How many potential customers are out there? What is their status, their average age, or their interests? Knowing your potential customer base assists significantly in developing a healthy business plan. It provides a notable edge over your competition when you walk out onto the plate to take a swing. But how do you conduct market research in the construction industry? One of the best sources is the SBA. The SBA provides an extensive range of no-cost resources with stellar data on markets and customers. From demographics to spending habits, employment statistics, and beyond, the SBA is a fantastic resource for businesses new and old. However, what happens when you want to dig deeper into your specific local construction sector? There are ample options available online that can be found on Google. Start by looking up your city name with “construction sector publications” in quotes. This should provide a list of magazines and publications from your area. Finally, one of the most effective methods to test out a potential customer base is to speak to them directly. Utilize surveys, interviews, or focus groups to obtain direct feedback from customers.
Setting Up Your Business PlanOnce you understand local markets, you can start building a plan. A business plan is by far one of the most crucial documents you will make when starting. This roadmap assists with keeping your business on the road to success. In addition, a construction company business plan is one document provided to lenders when seeking out funding. As a result, it is crucial to be as detailed as possible, putting the market research above to great use. Most standard business plans include the below details:
- The management and structure of the business
- What products or services provided to customers
- The jobs you plan to bid on
- Target markets you plan to solicit for work
- The number of staff and employees you will start with
- Any marketing strategies for your construction business
- Estimated costs to start and maintain the business
- Expected income in the first year, as well as other KPIs of importance