Being able to build something from the ground up is an incredible skill: a skill you can monetize into your own construction company. But, how do you start a construction business? And is it even a good idea?
The truth is, people are always going to need places to live, buildings to work in, schools to go to, and repairs to be done on all of these spaces. The other truth is that 63.6% of construction businesses close within their first 5 years of operation. That doesn’t have to be you, though.
Starting a construction business needs strategic planning, industry knowledge, and meticulous execution. It doesn’t matter if you want to build residential homes, commercial projects, or specialize in renovations, starting a construction company is going to have a unique set of challenges and rewards. We can help.
In this article, we explain what a construction company is, how it differs from other businesses, the benefits of owning a construction business, and nine steps you can take to get started.
What is a Construction Company and How is it Different from Other Businesses?
A construction company is a specialized business focused on building, renovating, and managing projects in the construction industry.
Unlike many other businesses, construction companies deal with physical infrastructure and project work. While many businesses have a set physical location, a construction company has many different sites operating at once. This requires expertise in project management, skilled labor, and complying with strict safety standards.
3 Benefits of Starting a Construction Business
We know it can sound like a lot of work and stress. But don’t worry too much: we don’t want to scare you off from starting your construction business because there are so many benefits. Let’s take a look at some.
1. Revenue potential
The construction industry is a booming business. New constructions started in the United States in 2022 were valued at almost 1.8 trillion dollars. You can choose to take on large-scale projects, infrastructure development, or residential/commercial projects which means you’ve got lots of options to choose from.
Want to bring in more revenue? Successful construction businesses can expand their operations gradually. Scaling up can look like taking on more extensive projects, branching into new specialties, diversifying your services, or expanding geographically.
Even though the market fluctuates, construction tends to be a stable industry. As long as there’s a need for infrastructure, homes, and commercial spaces, the demand for construction services keeps on, offering long-term stability for business owners.
2. Diverse and creative projects
Because the construction industry caters to a wide range of projects—from residential homes and commercial buildings to infrastructure, renovation, and specialized projects—it never gets boring. This diversity not only brings more revenue streams and a chance to expand on your skills but also creative opportunities.
Creative expression and creative problem-solving: two ways construction business owners can feel fulfilled in their work. If you approach the design, planning, and execution of projects with a creative eye that differentiates you from other construction businesses, well, it will only benefit your business.
3. Job happiness
Being happy at your job should never be underestimated. So, what are some areas of running a construction business that can bring you joy?
- Pride in your work: This is a big deal if you’re going to run a business! Watching something built from nothing can bring a huge sense of accomplishment.
- Flexibility: Running a construction business gives a certain level of flexibility in work schedules and project management. You can tailor your schedule by taking on certain projects at certain times to suit your preference so you’ve got balance in your work and personal life.
- Community development: Construction projects contribute significantly to community development by building essential infrastructure, enhancing living spaces, and improving the overall quality of life of a community. Being part of the solution to systemic problems can impact society positively—and leave you feeling pretty good too.
- Hands-on involvement: Entrepreneurs in the construction industry often have the opportunity for hands-on involvement in their projects. You can be directly involved in planning, executing, and overseeing operations, staying connected to pieces of the project you’re passionate about.
So while starting a construction business can be a risky venture, it’s also very worthwhile. Now, let’s learn the ‘how’ of how to start a construction business.
How to Start a Construction Business in 8 steps
If you want to learn how to start a construction business, you’re going to need to start at the beginning. It can be easy to get excited and buy all of the latest tools and equipment or start trying to find your first client, but you need a solid plan in place to make this last for the long haul—which is your ultimate goal.
Step 1: Do your research
To set your business apart, you need to conduct thorough market research to identify your target audience, local competitors, and emerging trends in the construction sector. Make sure to analyze the demand for construction services in your area and evaluate potential niches or specialties that could set your business apart.
Step 2: Write a business plan
Every business needs a business plan; a construction business is no exception. This blueprint will guide your business operations and serve as a roadmap for success. Even though this is a plan for your business’ growth, make sure it’s flexible enough to adapt to market changes.
The key elements of a business plan are:
- Executive summary: This section introduces your company’s mission and the people involved in running it. Break down why you do what you do and who’s in charge of making sure you achieve your business goals.
- Services offered: Describe the services you’re offering, including price and benefits. This is your chance to describe everything that’s going to make you different from other construction companies with the services you offer.
- Market analysis: This is where your research in the first step goes to use. Show your competitor and industry research, proving that there’s room for your business in the construction industry and there’s a demand for your specific services.
- Marketing strategy: Show how you plan to land projects and help customers find you. You can think outside the marketing box here. Yes, you’re going to want a website and some social media channels, but what are the creative ways you’re going to get people to notice your small business?
- Financial plans and projections: This is a key pillar of your construction business plan. You’re going to need to estimate what your business is going to spend money on and how much money you’re going to make. Banks or any other funding body is going to need these numbers to be precise
Step 3: Register your company
At this stage, you may need some legal help. Consider consulting legal and financial advisors to make sure you comply with local and state regulations. They can also offer guidance to register your construction company with the appropriate authorities, and obtaining the necessary licenses and permits required to operate legally.
None of these steps are really skippable, but this one in particular is incredibly important. You don’t want your hard-earned business shut down because you didn’t know you had to dot a certain ‘i’ or cross a certain ‘t’.
Step 4: Secure funding to get started
Explore different types of funding options like small business loans, investors, crowdfunding, or personal savings to cover the capital you need for startup costs, equipment purchases, hiring employees, and initial marketing expenses. All of those options should be line items in your financial plan.
This is the step where people can get really nervous because those startup costs add up quickly. But if you’ve got a solid financial proposal, you’ve got a plan to pay these costs back.
Step 5: Market your construction business
Now it’s time to get your first client. Put that marketing plan from your business plan into action. Get your website and socials up and running, and maybe do some free work for a local community centre or a family in need to showcase your skills and get the word out there.
Network with other skilled tradesmen to collaborate on projects and develop good referrals. Depending on your niche, you can even make some old-school marketing materials and go door-to-door putting flyers in mailboxes. Use your creativity here.
Step 6: Hire employees and subcontractors
This step is going to happen at the same time as marketing your business. It’s a little bit of the ‘chicken and the egg’ scenario. You don’t want to make a client wait while you hire employees, or have your employees to wait while trying to find a client.
You need to recruit skilled and reliable employees or subcontractors who know their stuff, are licensed in their trades, and align with your business’ values. From the beginning, you will need a systematic hiring process. Having your training resources all ready to go will be a big bonus to hitting the ground running when you do land that first client.
Step 7: Get the right equipment
This is one of the fun parts of the whole ‘opening a construction business’ thing. Based on the services you offer, write a comprehensive list of necessary tools, machinery, and equipment essential for your construction projects. Then go shopping.
If you want to save some money in the beginning, you can buy second-hand equipment or consider leasing larger equipment until you’re ready to purchase or upgrade.
Step 8: Maintain your business
You did it! You started a construction company. We wish we could say the hard part is over, but running a business is an ongoing process. You want to keep assessing your business operations, adapt to changing market conditions, and stay up-to-date on industry advancements. Regularly revisit and revise your business plan to ensure your company’s growth and success in the long term.
Help your Business Grow from the Start
As your business grows, you’ll need to adapt to the new challenges that come up. One of the biggest challenges construction businesses face is administration. When you have location-dispersed teams, a mix of employees and subcontractors, and lots of regulations and licenses to think about, you’re going to need strong software to help you run your business. Honestly? The sooner the better. Good software will start small with you and grow as you grow.
That’s where Homebase comes in. Homebase can help you with a variety of admin tasks for your growing business.
- Scheduling: Use the scheduling tool to make sure each construction site is fully staffed and that any PTO is accounted for.
- Time clock: The free Homebase time clock is not only an app that your employees can use to clock in from their phones, but it has GPS capabilities which makes it perfect for a construction business to avoid time theft.
- Payroll: With employees and subcontractors on payroll, payday can be a nightmare. With the payroll tool, keep everyone’s pay rate and hours straight without messy paperwork.
- Team communication: Keeping in touch with all of your employees all over the place is a challenge. Our team communication tool keeps all correspondence in one place and makes it easy for you to get in touch or for other employees to get in touch with each other—without disclosing their personal cell phone number.
We aren’t going to sugarcoat it. Diving into the world of construction comes with its own set of challenges, but the rewards are well worth it. There’s so much room for growth in the construction industry. You just have to start with the right steps. Good thing you found us.
Homebase can help set up a firm foundation for your new construction business.
Start your Business Off on the Right Foot with Homebase
Use the full Homebase suite—from the free time clock to the payroll tool—to keep your business running smoothly as you grow.
How to start a construction business FAQs
Do I need specific qualifications or experience to start a construction business?
Having qualifications in construction management, engineering, or related fields is beneficial, but they’re not always mandatory. What you will need is experience in the construction industry, an understanding of local building codes, safety regulations, and project management skills.
How much capital do I need to start a construction company?
The initial capital you need to start a construction business varies greatly depending on things like the scale of your operations, your equipment needs, hiring costs, licenses, insurance, and marketing. This is where your detailed business plan comes in handy.
What licenses and permits do I need to start a construction business?
The licenses and permits you need depend on your location and the type of construction work you plan to offer. Generally, you’ll need a contractor’s license, business permits, tax IDs, and possibly specialty trade licenses. But it’s always best to check with your local municipality and state to make sure you aren’t missing anything.
What are some challenges I should know about when starting a construction company?
Some common challenges when starting a construction company include competitors, getting financing, navigating complex regulations, managing cash flow, hiring and retaining skilled labor, and dealing with project delays or unexpected costs.
Remember: This is not legal advice. If you have questions about your particular situation, please consult a lawyer, CPA, or other appropriate professional advisor or agency.
