The construction industry has one of the highest failure rates compared to other industries. Only 47% of construction companies reach the fourth year in business. Construction company closures make up almost 14% of all failed businesses in the U.S.
This does seem like a gloomy outlook if you want to start a new construction company. There are common reasons why so many fail. They lack cash flow, underprice projects, or don’t have firm contracts in place.
How you set up your new construction company determines how successful you’ll be in the construction industry. Get ready for your first lesson as a small business owner.
Read on to learn how to start your construction business.
1. Write the Business Plan
You need to define what your business is, whether it’s residential construction or commercial construction. Research the market and know what makes your company worth doing business with.
You’re not going to be in business forever. Take time to note what your exit strategy is. For instance, you might sell the business, take it public, or hand it down to the next generation.
2. Learn Compliance Issues
As the small business owner of a construction company, you have to become familiar with laws and regulations that impact your work.
Building codes, permit processes, and employment laws are just a few issues that you need to be aware of.
Municipalities perform MS4 inspections to comply with their state’s Department of Environmental Protection regulations. Construction companies have to comply with these regulations, too.
Your failure to know about the various laws can delay projects and result in fines and penalties.
3. Fund the Business
It costs thousands of dollars to start a construction business. Take your business plan and use it to get funding for the business.
Loans and grants are two ways to fund the business. You can get additional funding from angel investors.
The key is to show how your new construction company will be profitable.
4. Purchase Equipment
Secure funding and get construction equipment. You might want to start with used equipment to lower costs.
This is a great time to establish relationships with equipment vendors. You’ll need their services for the life of your business.
5. Market the New Construction Company
Marketing the construction company is a simple process. You need to reach the right people (your target audience), with the right message, in the right place.
Look at places where your target audience spends, both online and offline. For instance, if you work in commercial construction, your target audience spends time on LinkedIn and local networking meetings.
Create the Best Construction Company
How can you make sure you have the best construction business? You have to learn to think like a small business owner and use your construction expertise.
The steps in this article showed you what you need to do to start a new construction company. Have a solid business plan and know the risks of running the business.
Now that you learned how to start a construction company, head over to the Business section for tips to help you tun the business.