There is always going to be a demand for construction companies, regardless of pretty much anything that happens in the world of business.
People are going to need homes built, offices constructed, restaurants, and shopping centers established – and that means they are going to need professionals capable of taking on the heavy lifting of making plans and blueprints a reality.
At the same time, figuring out how to start a construction company these days is fraught with challenges and obstacles to be overcome.
These kinds of companies are a little more complex to start from scratch, not only because there are so many moving parts to a construction company but because there is so much money, so much licensing and insurance, and so many things that can go sideways with each individual client or project as well.
Below you’ll find all the inside information you need to know to create a construction company from the ground up. We share everything you need to know about hitting the ground running with your new construction company while pointing you in the right direction for more details if you’d like to research things further on your own.
Do Research and Due Diligence
Before you start the process of building your own construction company you are going to want to think about what the construction landscape looks like right now (in your local area or the area you want to establish your company) to understand exactly what you are getting into.
You’re going to want to look at the kinds of companies that already exist that you’d like to emulate, the kinds of companies that you think you can overtake, and the kinds of companies that are going to represent the stiffest competition in your particular corner of the construction world.
Market research is a huge piece of the puzzle that informs pretty much every single other aspect of your business plan going forward. If you don’t know what the lay of the land looks like right now you’ll never be able to create a business built for success today and tomorrow – which is why your research really needs to be comprehensive.
Figure Out A Construction Focus
It’s equally as important to figure out what kind of construction company you are looking to build, something that should be as heavily influenced by your market research and due diligence as everything else.
For example, if you’re thinking about building a smaller construction company that tackles mostly residential projects you’ll want to know exactly how many other companies are in this space.
You’ll also want to know if there’s a lot of roofers and not a lot of kitchen renovation companies (or vice versa) – but that you’ll want to look deeper to figure out if there’s a lot of roofers because they are in such high demand.
It’s critical that you find a niche you can dominate at least initially, a niche that gives you a chance to differentiate your company from all others in the space, and a business that still offers plenty of room and space to grow as you expand and enjoy success. You should also be researching good procedures mistakes to avoid in the niche you choose. Setting up pre-construction meetings to avoid costly mistakes is one example.
If you’re interested in building bigger construction companies (becoming the general contractor on major projects, for example) you’ll want to still carve out a space for yourself and your company in that niche.
It’s all about finding a way to separate yourself from the rest of the pack so that your business has every chance of success, winning contracts because of what you offer as opposed to just crossing your fingers and hoping someone accepts your bids. Setting the correct contractor markup is also crucial.
Private vs Public Job Focus
Something else you are going to want to consider is whether or not you’re looking to pursue private jobs (working with private money, residential homeowners, private commercial property investors, etc.) or public jobs funded by local, state, or federal agencies.
There is a world of difference between these two kinds of jobs and you need to understand those differences before you jump right in.
This should be another big part of your research and due diligence, that’s for sure.
Knock Out A Business Plan
After getting a better idea of the type of construction company you want to build from the ground up it’s time to start putting your plans down on paper.
Some people feel that business plans are a bit antiquated in our modern business environment. But nothing could be further from the truth.
Not only are bankers and financiers going to want to have a look at a fully fleshed-out business plan before they hand over any kind of money that can be used to build a construction company, but business plans also serve to pour your goals, values, and business vision into concrete in a way that having all of those things in your head will not.
Your business plan isn’t just going to have to go over these “soft” topics that are critically important to your business success but should also go over how you’re going to start your business, how you are going to fund your business, how you are going to staff your business, how you are going to equip your business – and that’s just the tip of the iceberg.
You’ll want to make sure that you jump online and check out a couple of step-by-step tutorials for building a construction company business plan, following them to the letter while refining each individual letter until you’re able to come up with something that is really reflective of the business you’re looking to establish.
This manual of operations is going to be a living document of sorts (growing and changing as your business does) but it’s impossible to build a business this complex without really outlining fundamental details that lay down its foundation.
Secure All Necessary Licenses and Insurance
In an effort to avoid as much headache and hassle later on as you can you want to secure all business licenses necessary, all permits you need to operate, as well as business insurance and surety bonds that are going to give you the confidence and the security you need to operate this kind of business in the future.
Right out of the gate you’ll need to register your business correctly.
The next step is locking up your construction licenses and any initial permitting that you need.
Bid bonds, performance bonds, and payment bonds are just some of the surety bond options that are available to construction companies, and depending on your local laws and municipal regulations that they all may be required or only a handful of that may be required.
In a lot of circumstances, these bonds are 100% necessary to legally operate your business, guaranteeing that you repay your client if you aren’t able to fulfill all of the obligations you established in your contract to work.
This is something that your state licensing agent will be able to better clue you in on.
Streamline Your Logistical Department
A big part of successfully running a construction company comes down to managing your logistics, a department that usually gets very little love (because it isn’t as flashy as drawing up plans and then making them a reality out on the job site) but one that literally will make or break your success.
Your logistics department needs to be able to handle the administrative side of running your business – employment, training, payroll, etc. – but it also needs to have OSHA plans in place, a streamlined process for securing building permits and organizing job site inspections, a plan of action to keep up on all HUD standards, and that’s just the tip of the iceberg.
A lot of companies that do fantastic work when it comes to designing, building, and executing construction projects have absolutely abysmal logistics departments that cripple their success and almost always throw the company into chaos.
Take care of the logistics side of things and you’ll find everything else sort of falls into place. By using construction software like accounting programs, project management programs and estimation programs you can simplify your administration tasks.
Build Your Business with Smart Marketing and Advertising
The next piece of the puzzle is actually building up your business, and that means marketing and advertising intelligently.
As we highlighted earlier in this guide you’ll need to know what the lay of the land is like in your local industry so that you know what your competitors are saying to win business – something that will influence what you are going to say to gobble up market share and to start creating a successful business. For more in depth information read our guide on how to get more leads and grow your construction company.
Marketing and advertising – smart marketing and advertising, anyway – always begins with differentiation between you and your competitors. You have to give your potential customers and clients a reason to pick your business, and ideally, it isn’t revolving around a rock-bottom price that lowers your potential for success. This can involve anything from making yourself known through Facebook ads, to biding on keywords on Google ads or focusing on your construction website SEO.
Market research, different advertising campaigns to see which one wins, and other marketing approaches are all going to play a role in your ability to generate business as a brand-new construction company.
After you get a little bit of traction going, though, you want to be sure that you are marketing to past clients and asking them for referrals, and leveraging your network streamline things even more so.
The hardest thing you’ll ever do in business is to convince complete and total strangers to trust you with their hard-earned money. Once you win that trust you want to maintain that reputation while at the same time leveraging your history with those clients to build your business even bigger by offering them rewards (money or discounts) for referring you to their friends.
Tips for Hitting the Ground Running with Your New Construction Business
To round things out a little bit we’re including a couple of tips and tricks to help you really hit the ground running with your new construction business.
Starting off, it’s never a bad idea to find a mentor that has built a construction company from scratch and has walked in your shoes – and gone where you are hoping to – that can kind of steer you around when you are just getting started.
Contractor organizations are well worth any costs to become a part of, especially because of the networking opportunities that can either mean new projects in your sales funnel, access to trustworthy, reliable, and affordable subcontractors, and generally just a bit of market research.
Lastly, as we mentioned above, it’s a good idea to tap into referrals at every single opportunity.
Build your reputation alongside your business and safeguard it no matter what and you’ll find that your success as a construction company grows and grows faster than you ever would have thought possible.