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How to Start a Construction Company in 5 Steps

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Building and Construction

How to Start a Construction Company in 5 Steps

Want to make a living with a pick and a shovel? Or maybe you’d like to earn your fortune by making people go “wow, that looks very impressive” when they see a newly built building. This guide will help you better understand the steps you need to take to get started with your construction business and overcome the common hurdles most business owners face when getting started.

Maybe the thought has played on your mind for years but you never really knew where to begin. You know it’s not easy, but do you know exactly what it takes? It’s not just as simple as having a contractor’s license and getting to work.

Before you join the fray, there are many things to consider before you can successfully start your own construction business.

So, you need a plan of action first.

The aim is to get your own construction company off the ground as quickly and efficiently as possible while avoiding many of the pitfalls that can be encountered when setting up a new business.

Whether you want to start a construction business because you currently work in the construction field and want to branch out on your own or you are looking to start a career in construction, this brief guide will give you a head start on how to start a construction company.

Start a construction company in 5 steps

1. Preparation – understand the industry and market

If you want to start a profitable business in a dynamic field as construction, know it’s a whole new game. Keep your biases and “what I think” notions aside. And you also better be willing to learn the workings of the industry.

Here’s are some common questions:

What does it take to start a construction company?

The answer:

You require 4 key things actually: a niche, competence, a market and a business plan. So, let’s get into details…

Select a Niche

There are several specializations in the construction industry, therefore you must choose one, a few or make sure to have competent staff in all specializations.

Some of the major specializations are: plumbing, roofing, concrete, tiling, building etc.

For those of you who want to start a construction company, you must select an area that you want to invest in, or several more in order to be able to get more jobs.

If you are going to have several areas, note that you will need more staff so that each area gets the right skills. The advantage if you cover several areas is that you can get more or larger jobs. Plus, being able to do the entire contract yourself means you do not have to collaborate with other companies. In collaborating with other companies, there may be unnecessary costs and time losses.

Ensure Competence

The importance of competence cannot be overemphasized. If you or your staff don’t  know your job, injuries can occur, the work would be poorly done and you end up with dissatisfied customers. A dissatisfied customer can ask for a refund, demand that the job be remedied or take the matter to court.

Secondly, and especially if you are going to run the company yourself, basic knowledge of business administration, accounting and personnel issues is required.

Additionally, construction requires good equipment to work with and the right work clothes. Sometimes the jobs can be far from the office or your own home and therefore it can be good to have one or more company cars. The company vehicle would quickly get you to workplaces and also help transport tools.

If there is something within the company that you can not do yourself, it is always possible to outsource the work to someone else. It then becomes a question of cost. Is it worth learning and doing it yourself, or is it worth paying someone outside for the work? You decide. However, no matter what, make sure you can deliver what you promise your clients.

Location and Market Analysis

The analysis of the market plays an important role not only for the financing and the business plan, but also for your success as a building contractor.

Before starting a construction company, you should always carry out a comprehensive market analysis or have it carried out.

This gives you an overview of previous construction projects in the region, the average income and direct competition on site. You thus recognize the prerequisites for success and can put your construction company on a solid foundation.

The location is not necessarily that important for a construction company, but it should still be selected carefully.

On the one hand, the area you want to serve would play an important role for your construction company. In a rapidly developing region like New South Wales, Victoria, and Queensland with lots of construction activities, you will get jobs faster than in areas with predominantly rural outlook.

In addition, vehicular access should also be considered because it will play an important role. This is the only way your machines, your employees and your materials can be moved to the customer quickly and without much effort.

You should also consider the space available at the location. If you are self-employed as a building contractor, you usually have to have tools and materials on hand for the various construction sites. This not only has to be stored, but also appropriately secured.

Develop a Business Plan

A comprehensive business plan provides the basis for evaluating your economic realities and the potential of your construction company.

It is the tool that banks and lenders would use to evaluate your planning and your economic possibilities and is always thoroughly checked during the financing process.

Even if you do not need financing, you should nevertheless draw up a comprehensive and, above all, thoroughly checked business plan. Because it not only serves as a basis for financing, but also serves as a guide for the first years of self-employment to help you against getting bogged down in your planning or forgetting important elements.

From marketing to location analysis, from financing to the selection of the necessary employees, all points and requirements must be recorded in your business plan. For this reason, take a lot of time for your business plan and design it according to all common requirements.

2. Register and Obtain the Licence for your Construction Company

 

Your newly founded construction company must be registered and licensed.

In Australia know that there are a number of industry-specific licences depending on your trade, state and territory. That said, if you are starting a construction company in Australia, the major (general) licenses you need are:

  • Individual contractors licence – required before you can carry out any residential or commercial construction work.
  • Company contractors licence – for starting a limited liability or public company.
  • High-risk work licence – required for construction companies that will be operating heavy machinery.

For more details of all the construction licences and permits you may require to consult local authorities.

3. Satisfy safety requirements and acquire insurance for your construction company

One of the considerations that you should definitely make when setting up a business in the building trade should also include taking precautions to secure yourself against liabilities and other non-compliance penalties.

Because as a business owner in the construction trade, you must be personally liable for personal injury and property damage where, even a carelessly left device or small mistakes can have costly consequences for you.

So, it is important to follow WHS Policies and Procedures in Australia. In some cases, you would be required to produce a robust WHS plan before some licences can be issued to you.

No matter the case, the importance of implementing a WHS management system is something that cannot be overlooked.

WHS management is a legal requirement, and you have to, by law, have a WHS system in place. To make light of the entire process, a WHS software can track your elements of control and allows you to manage the risks in your workplace.

So also, make sure you insure your company against possible accidents. With that in mind, these are the two most important insurance covers you should obtain when starting your construction company: Public Liability Insurance and Workers Compensation Insurance.

4. Secure Funding, and hire Staff for your Construction Company

Aside from choosing your niche and building your competencies in your industry – commercial skills are also extremely important if you want to successfully set up your own construction company.

First of all, you need to secure the funds that will be necessary to start and run your construction company.

Construction machinery, tools and transporters that are used to bring building materials from the business premises to the construction site are the first investments that you have to calculate.

Before you buy expensive equipment right away, consider borrowing or leasing it first.

In addition, personnel costs – if you are not setting up a business as a sole proprietor, ensure you have adequate capital to cover the payments of subcontractors or your partners.

As a start-up in the building trade, you should make sure you can cover costs until you start earning your first income. Because your customers would most likely pay at the earliest when the construction work is complete and have accepted the services provided.

All in all, you shouldn’t just make provisions for only the start-up costs your construction company will face. You must also consider the running costs and ensure that your expenses can be covered by your income in the long term.

Yet, in most cases, the costs for the company and the equipment can significantly exceed your own resources.

This is where a business plan comes in. Use it to apply for loans and funding from banks and other lenders.

One of the prerequisites for a good and efficient construction company is good staff.

Your workers do not only have to be reliable, they also have to meet the common requirements of the industry and have the various specialist knowledge.

Before you hire anyone, ensure they fit into the business culture you are trying to establish. Your recruitment process should not be treated as an afterthought – craft detailed job descriptions, conduct a well-thought-out in-person interview that covers all the bases, and make your salary attractive. In the end, your goal is to see to it you hire the most qualified specialists that fit into your plans for your business both now and in the future.

5. Marketing: Find ways to beat your competition

For a construction company, profitability plays a decisive role. However, this also means that you have to clearly differentiate yourself from the competition.

You have to define a clear unique selling proposition which will set you apart from other companies and direct competitors.

The price usually only plays a subordinate role. The range of your offers and the quality of services you provide would play a much more important role, especially for a construction company that is just starting out.

As a prospective construction business owner, you have to draw attention to yourself and your offer. There are various options for doing this.

The classic way includes distributing flyers, placing advertisements or launching your company with a grand opening ceremony.

In addition, you should also take full advantage of online marketing opportunities. This is usually inexpensive, which is convenient for you at the beginning of your self-employment.

Create your own Facebook page where you can also get in touch with your customers, among other things. You can Instagram and Pinterest to share your portfolio. You should also register in online business directories such as Google My Business, as well as register on industry specific forums. Having a company website is equally a brilliant idea you should not sleep on.

Final Words

You’ve probably always dreamed of starting your own construction company. Well, with the information in this post, it’s time to get started right away and change those dreams into reality.

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