How To Start A Construction Company In 10 Actionable Steps

It makes sense to begin considering becoming your boss once you’ve honed your craft and mastered your job. Over the past few years, the construction industry has experienced rapid expansion that shows no indications of abating.

Here are 10 steps you may follow to launch your small construction firm if you’re interested in making the transition from employee to employer.

1. Decide on a name for your construction business

Choosing a company name and slogan is the first step in launching a construction business.

This is a crucial decision because your company name will serve as your brand throughout the existence of your organization. Ideally, you pick a name that will stick in people’s minds.

Here are some ideas for naming your construction business:

Verify that the name is accessible. To determine whether a name is available, search trademark databases and your state’s list of registered business names. Additionally, see if a good domain name is accessible.
Keep it basic. The finest names are typically those that are simple to spell, pronounce, and remember.
Consider marketing. Create a name for your construction company that accurately captures the desired brand and/or business objectives.

2. Create a business plan for your own construction company

Creating a business plan is one of the most crucial tasks in launching a construction company. Your understanding of your market and business strategy will be ensured during the planning process.

The plan also gives you a road map to follow and, if necessary, a document to show to funding sources to secure investment for your company.

The following sections should be present in your business plan:

• Detailed Summary

Your business plan should be summed up in this section so that readers can easily grasp the most important information about your construction company.

• Company Overview

This section provides the reader with information about the background of your construction company as well as the nature of your industry. Are you a general contractor, a project manager, or a specialist contractor, for instance?

• Industry Analysis

In this section, you will summarize important facts concerning the construction sector. Perform market research to determine the size of the sector and the trends that are affecting it.

• Customer Analysis

In this part, you will list the characteristics of your ideal or target customers. For instance, are you aiming for residential or business clients?

• Competitive Analysis

You will outline the market competition for your construction company in this section. Who are your main competitors and what strategies do they employ? What position will your company take in the industry?

• Marketing Strategy

In your marketing strategy, you should explain how you intend to find and attract new clients. What marketing platforms will you employ? Which communications system will you employ? The four Ps of marketing—Product, Price, Promotions, and Place—should be covered in your plan.

Product: Identify and record the services you will provide.
Prices: List the costs for the services provided by your business.
Location: Where will your company be located, and how will that affect your restaurant’s ability to boost sales?
Promotions: What advertising strategies will you employ to get patrons to your restaurant? For instance, you might choose to employ social media marketing, search engine optimization, public relations, or pay-per-click advertising.

• Operational Plan

This part outlines the organizational structure and daily operations of your construction company. It should contain details on the physical location of your company, its tools, supplies, and personnel.

The crucial procedures you’ll require to manage your daily business operations will be determined by you. Your staffing requirements will also be determined. The anticipated growth timeline you develop in this portion of your strategy will highlight the milestones you hope to hit in the upcoming years.

• Management Team

Describe the management team of the construction company and their background in the sector.

• Financial Plan

In this part, you’ll outline your construction company’s financial expectations. Your cash flow statement, cash flow estimates, and cost budget should all be included in this.

What beginning expenses may you expect?
How will your business generate revenue?
For the next five years, what are you estimating for sales and expenses?
Do you require financing to start your business?

3. Determine Your Construction Company’s Legal Structure

The next step is to select a legitimate business structure for your organization and register both it and your company name with the secretary of state in each state where you conduct business.

The five most typical legal structures are listed below:

1) A single-person business

A sole proprietorship is a type of company where the owner and the firm are the same legal individual. In this instance, the owner of the building company is liable for all debts and contractual obligations.

A single proprietorship is simple to start and manage and does not involve any paperwork. The biggest benefit of a sole proprietorship is how easy and affordable it is to start one. The biggest drawback is that the firm owner is responsible for all debts and responsibilities.

2) Collaborations

The standard legal structure for small firms is a partnership. It is a contract between a pair or more individuals who desire to launch a construction business together. The partners divided the profits and losses of the business.

A partnership has the benefits of being simple to form and having the partners split the company’s gains and losses. The disadvantages of a partnership include the fact that the partners share responsibility for the company’s obligations and the difficulty in resolving partner disputes.

3) Limited Liability Company (LLC)

A limited liability corporation, or LLC, is a type of corporate entity that offers its small business owners limited liability. This means that the owners of an LLC engaged in the construction industry are not individually liable for the debts and liabilities of the company.

For a construction company, an LLC offers management flexibility, pass-through taxation (which prevents double taxation as will be detailed later), and restricted personal liability. The lack of availability of an LLC in some areas and self-employment taxes are disadvantages.

4) C Corporation

A C Corporation is a legal corporation that operates independently of its owners. It is tax-exempt and can have shareholders. The fundamental benefit of a C Corporation for a construction company is that it provides its owners with limited liability.

This indicates that the company’s obligations and liabilities are not personally owed by the business owners. The drawback of C Corporations is that they are vulnerable to double taxation. This implies that in addition to the shareholders paying taxes on their dividends, the corporation also pays business taxes on its profits.

5) S Corporation

A type of organization known as an S Corporation offers its owners limited liability protection as well as the option to carry through corporate income to their income tax returns, preventing double taxation. S Corporations are subject to several restrictions, one of which is the maximum number of shareholders that they may have.

Your state will send you your official “Articles of Incorporation” as soon as you register your construction company. This and additional paperwork are requirements for opening a bank account (see below). We advise you to speak with a lawyer to choose the legal framework that is most appropriate for your business.

4. Obtain Startup Capital for Your Construction Business (If Needed)

You may have decided that you need to raise startup funding to establish your construction firm when creating your business strategy for the industry.

If so, the primary funding options for a construction company to take into account include equity investors, small business loans, loans from friends and family, and personal savings.

• Personal Savings:

For new businesses, the proprietors’ savings are frequently the main source of initial capital. You might not need to look for outside investment if you have enough money saved to pay for all of your beginning expenses.

• Loans from Friends and Family:

Loans from friends and family are another typical source of capital for a new construction company.

This can be a fantastic choice if you have people in your life who are prepared to invest in your company. But it’s crucial to keep in mind that these loans should be handled similarly to any other loan, with agreed-upon interest rates and payback schedules.

• Business Loan:

If you’re looking for capital for your new construction business, you should also take into account small business and equipment loans.

You should look around to get the small company loan that best meets your needs because there are many different small business loans available, including Small Business Administration (SBA) loans. Make sure you comprehend any loan agreements completely before signing anything.

• Equity Investors:

Finding equity investors is another way to raise money for your startup business. Equity investors are people or businesses that put money into your firm in return for a share of the company. This implies that they will be entitled to a share of the earnings and will own a section of your company.

A strong business plan and a polished presentation deck are essential if you decide to look for equity investors. You’ll have to persuade prospective investors that your business is a wise investment.

5. File an IRS Form for Your Construction Company

The Internal Revenue Service (IRS) will issue you an Employer Identification Number (EIN) if you register your company with them (EIN).

To open an account, the majority of banks and other financial institutions require that you have an EIN. Additionally, since the IRS uses your EIN to track your payroll tax payments, you will need one to hire employees.

Be aware that you typically do not need to obtain an EIN if you are a solo entrepreneur without workers. As opposed to using your EIN, you would utilize your social security number as your taxpayer identification number.

6. Open an organization bank account

It’s crucial to open a bank account in your business’s name. The stages involved in this straightforward technique are as follows:

Find and get in touch with the bank you want to use.
Compile and deliver the necessary paperwork, which typically consists of the articles of incorporation for your business, a driver’s license or passport, and a proof of address.
Fill out the bank’s application form completely and include all necessary details.

Meet a banker to talk about your company’s needs and build a connection.

7. Employ People for Your New Construction Business

You should begin hiring staff once you have all of the required authorizations, equipment, and software in place. The size and scope of your organization will determine the kind of staff you require. Among the most popular positions are:

Project managers: Project managers are in charge of supervising a construction project’s daily operations.
Construction Employees: The real work of a construction project is carried out by construction workers.
Office Manager: The office manager is in charge of overseeing the administrative and office workers within the organization.
Accountant: The accountant is in charge of managing the business’s finances, including payroll, billing, and invoicing.

8. Obtain the Business Licenses and Permits Necessary

The next step is to get your firm the necessary licenses and permissions. Depending on the state and municipal legislation where your firm is located, you may need a different set of specific licenses and permissions.

You can get in touch with your state’s company licensing office or your neighborhood Chamber of Commerce to find out which licenses and permissions you require.

The following are a few of the most widespread licenses and permits for construction businesses:

General business license: Operating a business typically requires obtaining a business license.
Building permit: In general, a structure permit is needed to create a new one or to add on to or renovate an existing building.
Zoning permit: In some cases, you’ll need one to run your new company in a specific area.
Construction license: To run your firm, you might need to acquire a construction license in some areas.
Environmental permit: If you’re planning any building work that might influence the environment, you might need to get one.
OSHA certification: If you plan to perform any task that could put your employees in danger, you might need to get certified by OSHA.

9. Purchase the Proper Insurance for Your New Construction Business

Construction is a risky industry, so it’s critical to have the appropriate insurance coverage in place to safeguard your firm against potential liabilities.

The kind of insurance coverage you require will depend on the size and scope of your business. There are many different insurance products available for small businesses. The following are a few of the most typical insurance plans used by construction companies:

General Liability Insurance: This insurance shields your firm from lawsuits brought over by injuries, property damage, and other losses resulting from your operations.
Workers’ compensation insurance: This insurance shields your staff from financial loss if they have an injury while on the job.
State Disability Insurance: This insurance offers benefits to workers who are disabled and unable to work.
Unemployment Insurance: Employees who lose their jobs through no fault of their own are given benefits under unemployment insurance.
Business Owner’s Policy (BOP): A BOP is a type of insurance that combines property insurance and general liability insurance into a single policy.
Equipment Insurance: It’s crucial to have your equipment covered in case of damage or theft if you own any.
Vehicle Insurance: If your business has any vehicles, you must insure them.

10. Purchase or Rent the Appropriate Construction Equipment

You’ll need the appropriate tools if you want to start a successful construction company. The necessary equipment is available for purchase or lease.

You will need to obtain financing if you choose to purchase your equipment. Obtaining a loan from a bank or other financial organization is one choice. Another choice is to employ equipment finance, a sort of financing designed exclusively for the purchase of equipment.

If you choose to lease your equipment, you must locate a leasing firm with experience leasing construction equipment.

Author Bio
Rebecca Phillips is a qualified content writer with experience in writing on a variety of subjects. He has written a lot of Content on Construction Business, and structural engineering for http://www.universalengineering.net as well.