So you want to start a new business in the construction industry? Not so fast.
Only 36.4% of new construction businesses survive, so it’s important that you keep your expectations in check. You need to have a clear plan in place if you’re starting a construction business and should get all of your ducks in a row beforehand.
Fortunately, we’ve got you covered. In this guide, we’ll make starting a new construction business simple.
Start With Thorough Research
The first thing that you’ll need to do when launching a new construction company is to do plenty of research on the industry. You should find out everything you can about the construction industry and about your local market.
If there are already a lot of other construction companies that are active in your area, it could be difficult for you to launch your own construction business. It’s a good idea to find out what you can about other local construction companies. Determine how much they charge and what kind of reputation they have.
You should also find out about your target audience. Understand what potential customers there are in your area and get an idea of what their demographics are.
Getting all this information beforehand can help when it comes to launching your construction firm and trying to become profitable.
Create a Great Business Plan
Next, you’ll need to write a business plan. A business plan will be essential for you to use as a road map as you launch and grow your business and can help to keep you on track. In addition to this, a business plan can help you to get funding and can show lenders that you know what you’re doing.
When creating your business plan, you’ll want to consider many things such as what services you’ll provide, how you’ll manage the business, and who your target market will be. Make sure that you’re thorough when creating a business plan so that it will do a good job of helping guide your business forward.
Register Your Business
After creating a business plan, you need to register your business. This will allow you the protected legally and help ensure that you’re operating under the full scope of the law.
You’ll want to be sure that your business is registered fully before you begin work. You should also plan on getting a federal tax ID or employer identification number (EIN).
Additionally, you’ll also need to choose a suitable business structure to use for your construction business. There are several options including forming a sole proprietorship, a general partnership, a limited liability company, or a type of corporate structure.
Be sure to do your research on each one of these legal structures and make sure to choose one that’s right for your construction business.
Understand Licensing Requirements
For a business in the construction industry, it will also be necessary to get certain licenses and permits in addition to performing the basic business registration tasks listed above. You’ll need to check with your state and local government to find out exactly what types of licenses you’ll need to have to do business in your area.
You’ll usually need a general contractor’s license as a construction company. You may also need a specialty contractor’s license as well if you’ll be performing specialized work such as carpentry, electrical work, roofing, or HVAC installation.
Get Insurance
You’ll also need to get insurance for your construction business as well.
It’s important to take liability seriously and to make sure that you’re covered in case of property damage or employee accidents. General liability insurance is absolutely essential and will help ensure that you’re protected in the case of accidents on the worksite that result in injuries or property damage.
Property insurance should also be used to cover your physical office. You may also need vehicle insurance for your vehicles and construction equipment as well. Workers comp insurance, unemployment insurance, and state disability insurance can all be useful as well.
Seek Business Funding
To launch your construction company successfully, you’ll also need to have funding. While you may choose to self-fund your business through savings, you’ll likely need to consider other options.
There are several options available for funding a construction business. You’ll want to learn about each of them and determine which ones may be right for you.
Working with traditional lenders such as banks and credit unions can be an option. However, you should consider government loans and private lenders as well.
Small business loans are one good option that you can consider to get funding for your business. Working capital loans, vendor financing, and purchase order financing may also be helpful to cover your operations and get the materials you need for your business.
If you have a specific construction project in mind, you may also want to read more about how a spec loan works.
Manage Your Business Well
Once you’ve launched your business, you need to make sure that you’re operating in a smart way and also building a great reputation
You should create a marketing strategy that includes both traditional and digital marketing methods and should seek out great clients. Make sure that you’re giving clients the best service possible as this will help you to create customer loyalty and build your reputation.
You’ll also need to be sure to be fair when creating contracts. Be as upfront as possible and clear when working with other parties.
Be sure that you’re working to run your business wisely while building your reputation if you want your company to stand the test of time.
Following These Steps to Launch a New Construction Business
Starting a successful new construction business is not an easy task, but it can be done. However, you’ll want to make sure that you follow the tips above and create a clear plan before launching your business.
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