Starting a construction company can be a very profitable business venture, but it’s important to understand the step-by-step process.
This article will outline the key steps for starting a construction company and provide tips for success along the way.
Here are the ten steps you can take to start building your own construction business.
Ten Steps to Launching a New Construction Business
1. Choose Your Type of Construction Business
The first step in launching a construction business is to identify the type of construction business you want to launch. You might choose from the following types among others:
- Home builders who construct new homes from the ground up
- Commercial construction companies that build office buildings, retail stores, and other businesses
- Industrial construction companies that build factories, warehouses, and other large structures
2. Name Your Construction Business
Give your construction business an identity so people will think of it as a well-known and respected brand. You can take the name of your construction business from your industry, focus on a geographical location, or use your own name among other options.
The main goal of naming your construction business is to make it sound appealing and trustworthy so that potential customers will seek you out when they need construction work completed.
3. Determine Your Construction Business Model
There are several possible types of business models for a construction business including:
- General contracting, where you take on the entire construction project from start to finish
- Design-build, where you partner with an architect or designer to create the plans for the project and then build it
- Construction management, where you act as a manager overseeing subcontracted construction workers
No matter which model you choose, make sure that it aligns with your business goals and the services you offer.
Read more about choosing the right business model for your construction business.
4. Choose a Legal Form for Your Business
By incorporating your construction business, you will limit your liability. You can incorporate as a Limited Liability Company (LLC), a C Corporation (C-Corp), or an S Corporation (S-Corp). Or you can operate as a sole proprietorship.
The business structure you choose for your construction business will determine the amount of taxes you pay and which state or federal tax forms you need to file.
Read our article comparing the most common construction business structures.
5. Write a Construction Business Plan
All construction business owners should develop a business plan.
A business plan is a document that outlines the goals, strategies, and operations of a business. It can be used to secure funding from investors or lenders, as well as to guide the day-to-day operations of the business. The business plan should include information on the company’s products or services, market analysis, financial projections, and management team among other things.
Read our article about how to write a construction business plan.
6. Apply for the Necessary Permits and Licenses
There may be required licenses and permits you need to obtain before launching your construction business.
For example, if you will be operating a homebuilding business, you may need to obtain a contractor license.
You must also register your construction business as a legal entity with the state where you plan to do business. You can simply file an online form through your Secretary of State website.
Registering with the federal government is also essential so you can properly pay taxes for your business. You will also need an Employer Identification Number (EIN), which you can apply for at the IRS website, if you plan to hire employees.
Read our article about obtaining the proper construction business licenses.
7. Determine Your Budget & Apply for Funding as Needed
In developing your construction business plan, you will figure out how much funding you need to start and grow your business.
If you have your own funds to invest in your construction business, you may consider taking advantage of that. In addition to your personal funds, other forms of potential funding for your construction business include traditional bank loans, SBA loans, credit cards, angel investors and family and friends.
Read our article about the costs associated with starting a construction business to help you determine if funding is needed.
Read our article about how to fund your construction business.
8. Get the Technology & Software Needed to Run Your Business Efficiently
When you start your construction business, it’s essential to have the right technology in place to maximize efficiency. You definitely need a computer with Internet access, and accounting software for tracking expenses and revenues.
You may also want to invest in construction management software, which can help you with bid estimation, project management, job site collaboration, and more.
There are many other types of software available for construction businesses, such as time tracking software, construction document management software, and construction CRM software.
Read our article about the technology and software you need to run a construction business.
9. Market Your Construction Business to Potential Clients
Before you start selling your services, you have to let the world know you exist. The first step is to create a website so people can learn more about your services and how they benefit them.
After you launch your website, start promoting it through social media channels like Facebook, LinkedIn, and Twitter. Also consider networking with other people in the construction industry through social media and blogs so they can help share your business.
You also need to start gathering the materials needed to execute on your promotions strategy, which is your strategy for attracting new customers. Construction businesses should consider the following promotional strategies for which you should start getting prepared:
- Develop a marketing brochure highlighting your company’s services
- Create a portfolio of your previous work to show potential clients
- Get involved with local organizations and business groups
- Develop relationships with local real estate agents
- Participate in home shows and tradeshows
Read our article about how to market your construction business for more tips.
10. Get New Clients & Grow Your Business
When you promote your services, you’ll start to get interest from potential clients.
Make sure you’re ready to serve these clients. Also, be sure to establish systems to ensure consistency and reduce costs. And be sure to find and train the right people to help you grow your construction business.
Read our article about how to effectively grow your construction business to learn more.
Starting a Construction Business FAQs
There are many reasons to start a construction business. Maybe you enjoy the creative aspects of designing and building projects. Perhaps you take pride in a job well done and enjoy the satisfaction of completing a project on time and within budget. Or maybe you like working with your hands and being outdoors.
The outlook for the construction industry is also positive. The industry is expected to grow by 11 percent from 2019 to 2029, according to the U.S. Bureau of Labor Statistics
To start a successful construction business, you need to have experience in the industry and a strong understanding of the business. You also need to be organized, have good people skills, and be able to effectively promote your business.
You'll need to acquire the proper licenses and insurance for your business, and have the right technology and software in place. You should also develop a marketing strategy and start networking with other people in the construction industry.
In addition, you'll need to invest in equipment and materials, and find and train the right employees.
Here are some tips for starting a construction business:
- Have the right experience and understanding of the business.
- Be organized and have good people skills.
- Acquire the proper licenses and insurance for your business.
- Have the right technology and software in place.
- Develop a marketing strategy.
- Start networking with other people in the construction industry.
- Invest in equipment and materials.
- Find and train the right employees.
- Create a website and promote your business through social media channels.
- Allow clients to book your services online.
- Showcase your portfolio with videos.
A simple checklist to use when starting a construction business is as follows:
- Choose Your Type of Construction Firm: This should be based on what you are best at and how much experience you have. Remember to keep your interests, skills, and experience in mind at all times.
- Name Your Construction Business: This should be done with care, as your brand is important for attracting the right customers. A simple, memorable name will go a long way.
- Choose a Legal Form for Your Business: Whether you choose to become a sole proprietorship, partnership, LLC, corporation or another option will depend on your business. Ensure that you are aware of all the implications of each type.
- Determine Your Construction Business Model: Determine how your business will make money. Will you sell products, services, or a combination of both?
- Write a Construction Business Plan: Your business plan will also help you determine your start-up costs and will provide a roadmap with which you can launch and grow.
- Apply for the Necessary Permits and Licenses: In most locations you will be required to apply for a business license and/or permits before you can begin operations.
- Determine Your Budget & Apply for Funding as Needed: You will need to know how much money you have to spend on all of your business-related expenses before opening any doors. If needed, apply for a small business loan or other funding options.
- Get the Technology & Software Needed to Run Your Business Efficiently: You need to have the right tools in place to succeed. Implement software that will help you manage your time, contacts, and business operations in general.
- Market Your Construction Business to Potential Clients: A solid marketing plan will be crucial to your success. It should focus on attracting the right customers so that you can provide them with the services they truly need.
- Get Clients & Grow Your Business: Once you have a solid marketing plan, it's time to actively pursue and secure those who could benefit the most from your services.
A construction company is a great business opportunity for entrepreneurs with the experience and skills necessary to start and run one. Many things go into starting a construction company, such as choosing the right type of firm, acquiring the required licenses and insurance, and writing a business plan. Following these tips, you can start a successful construction company.