Construction is currently one of the largest business sectors in the economy. That’s because real estate is booming and the demand for new units continues to go up.
However, starting a construction business isn’t as straightforward as many people with experience in the industry imagine. It’s not just about using your contacts and winning contracts. There’s more to it than that.
In this post, we take a look at some of the things you need to do before you start a construction business of your own. Read on to find out more.
Find Out How To Grow Your Business
The first task is to find out how you can grow your business. It might sound like a bit of a strange thing to say, but you need a long-term growth plan to ensure that you remain in business for a decade or more.
The best approach is to have a project timeline – what you will do, and in which sequence. Once you have a clear picture of how you will proceed, you can then move onto analyzing whether demand for your services will continue well into the future.
Always Be Honest About What You Can Deliver
The next step is to chat openly and honestly with your clients about what you can deliver. Contrary to popular opinion, customers don’t expect the world from you. Instead, they want you to deliver something in line with the prices that they pay. So, for example, there is nothing wrong with offering a budget finish, as long as you price accordingly and explain what it will look like to your clients.
Get More Funding
Construction is a capital-intensive enterprise, and so many companies require funding to keep them afloat. It’s a good idea, therefore, to have plenty of funding available, should you need it.
Fortunately, at the moment, getting credit is relatively cheap. Many investors are looking for ways to use their cash and see construction as a way to do it.
It turns out that there are also a lot of other credit options. Things like banks, credit unions and even government agencies may provide grants for construction projects.
Reduce Your Running Costs
Just because construction businesses imply some setup costs, doesn’t mean that your running costs need to be high. In fact, there are plenty of ways that you can reduce your ongoing costs, allowing you to keep your fees to a minimum.
One strategy is to use subcontractors for all specialist work. This way, you don’t need to maintain teams of people in-house who might sometimes find themselves idle.
Another tactic is to rent your equipment instead of buying it. Today’s crane hire options are highly flexible, allowing you to rent cranes for as long as you need. Renting lets you preserve your capital while scaling your business when the situation calls for it.
Get Yourself Covered
Construction isn’t the safest industry in the world. In fact, it is responsible for more on-the-job injuries and deaths than practically anything else. For this reason, you will need to ensure you have all of the correct safety equipment and PPE in place, such as safety harnesses and traffic barriers, hard hats and work boots to ensure workers are kept as safe as possible at all times.
Getting yourself covered can help to prevent this. The more insurance and liability cover you have, the more likely you are to avoid high liability payments in the future.
Remember, even if compensation claims against you seem unlikely, they can and do happen. Many workers sue their firms every year for big payouts. Insurance pays for most of these, but if you don’t have cover, you don’t have any protection. What’s more, you could face legal issues.
Get The Permits You Require
In many places, you’re only allowed to work on a project if you have the right permits. If you fail to get the correct documentation, you could face legal challenges and get struck off industry bodies for life.
For example, if you’re drilling and mining, you’ll need a permit. This document allows you to conduct various building or construction projects within a particular domain. Conveniently, many of these permits are available online for a small fee, as long as you can prove a minimum level of training or experience.
Register Your Company
Registering your company is essential for construction businesses. While some people operate sole proprietorships and partnerships, they are few and far between. Limited companies protect against financial risk, and they more easily slip into the wider supply chain.
The process for setting up a limited company is easier than many people realize. You simply register the name of the company with the state and local government and then set up your various tax identifications.
The precise rules for registration vary from country to country. But, in general, you’ll need to choose a name, set up an accountant and get a business bank account. The entire process usually only takes a few days.
Set Out Your Business Plan
For some people, business plans feel like a chore. All you want to do is get going with your enterprise – you don’t want to write down your plans for taking it forward.
While it might seem like extra work, business plans are valuable. The reason for this is quite straightforward: they remind you to always stay on the straight and narrow.
Many companies in the construction sector go off the rails. Initially, they imagine themselves doing utility work but then, when opportunity comes knocking, they switch to office construction and so on.
Ideally, you don’t want to be like this. Instead, you want to stick with a proven business model and gain a reputation in that area. If you keep changing what you do, you’ll fail to develop a niche reputation.
Figure Out How Many People You Need
Lastly, you’ll want to figure out how many people you’ll need to run your operation. Employees tend to be the most expensive element of your organization, and certainly your biggest on-running costs. Think carefully about the number of people you require to deliver the type of projects you’ll work on. Be specific and make a distinction between “core” full-time staff and contractors who operate separately. In the vast majority of cases, you’ll want a combination.