How to Start a Construction Company

The need for residential, commercial or industrial property is constantly growing as the population increases.

This means there will always be a demand for good builders who can turn an architectural plan into a beautiful structure. If you have the trade skills and the expertise, starting a construction business could be a great way to build a solid future.

There’s plenty of room for specialty construction businesses too, so finding the right building niche will help you get a reputation for specific expertise.

Since construction businesses also tend to be local, if you find an area where there’s a large demand for property, that could give you a significant boost.

We want to help you get your construction business off the ground.

Since 2004, we’ve helped over 500,000 people to become entrepreneurs, starting exciting businesses and bringing their ideas to life. We’ll give you the support, guidance and advice you need to create a business and make it into a success.

From validating your business and doing the research to filing your paperwork and running your business, this guide will help you out.

We’ll talk you through the main things you need to do to get your construction business off of the ground.

Read on for some insight into creating your own construction business and becoming an entrepreneur. In this guide we will cover:

Statistics on why you should start a construction business

Learning if a construction business could be right for you

Ideas for the type of construction business that you could form

How to validate your construction business idea

Business plans for construction companies

Where to find construction business groups, forums and support

Helpful software for construction business owners

How to choose whether your construction business should be an LLC or corporation

How to start your construction business with information on equipment, employees, location, permits, finance, taxes and more

Why You Should Start a New Construction Business

You might wonder how successful construction businesses are - we’ve got the facts.

This is why construction businesses are so exciting - how can you be part of that success? We're here to help you figure that out.

900B

How to choose whether your construction business should be an LLC or corporation

$1.2T

The U.S. has one of the largest construction markets in the world, with expenditures of over $1.2 trillion

$1.4T

Expected construction expenditures grow by 2021.

The U.S. construction industry is responsible for over 4% of U.S. GDP

Currently, the majority of growth in the construction industry is in residential building

Public sector construction saw the slowest growth

This is why construction businesses are so exciting — how can you be part of that success? We're here to help you figure that out.

Is a Construction Business Right for You?

Although it can be exciting to form a construction business, there will be significant demands on you as a small business owner. Here are some of the things you can expect.

A Day in the Life of a Construction Business Owner

Here are some of the typical tasks you’ll be performing for your construction business on a daily basis.

Working with architects and engineers to finalize plans and details

Coordinating with tradesmen and contractors on specialized services

Project managing people, resources, materials, timings and deadlines

Carrying out construction activities yourself

Troubleshooting issues and problems with the construction process

Purchasing and managing supplies and materials

Skills Needed by a Construction Business Entrepreneur

The following skills will be very useful in your role as a construction small business owner.

Excellent project management skills so you can coordinate the build from beginning to end

Great interpersonal skills for managing tradesmen, contractors and others

An eye for detail to ensure a high-quality outcome

Good personal construction skills

Analysis and problem-solving expertise

What Your Construction Customers Are Looking For

Construction customers vary, from property developers wanting to flip a house to commercial organizations looking for new locations. The two things everyone is looking for is quality and reassurance. They need any construction to be of a high quality — up to code, meeting the needs of the client and delivered to scope. They also want reassurance that you will deliver on time and on budget, and that you’re able to solve any problems that come up during construction.

What Type of Construction Business Should You Start?

There are several different types of construction business that you can start. Here are some of the more popular options.

1

Environmental Home Construction

The need for ecologically-friendly, low-waste, environmental homes is growing constantly. This is a lucrative market for construction entrepreneurs with green credentials.

2

Special Commission Construction

The desire for one-off, specially-commissioned homes is also growing as homeowners are moving away from cookie-cutter house plans. This type of construction requires good relationships with architects and designers.

3

Tiny Home Construction

Tiny homes are also on the rise as a low-cost way for people to get into home ownership. They are especially popular in certain communities.

4

Retail Construction

The retail space is becoming more challenging as traditional stores try to compete with ecommerce websites. A construction business with retail and commercial expertise can create spaces where shoppers love to spend money.

There are dozens of other niches including using reclaimed materials, industrial construction, commercial construction, constructing vacation rentals and much more.

Validating Your Construction Business Idea

The construction areas above are just starting points — there are many different types of construction businesses. Once you’ve identified the areas you’d like to go into, you need to validate your construction business idea to make sure it’s going to work in the real world.

Before committing too much time, energy and money into your new construction business, it’s important to test the marketplace.

Identify your construction business’s unique selling points (USPs)

You will need to provide a compelling reason for clients to use your construction services for their building needs. Whether it’s your niche or your particular skill set, make sure you have something to bring to the table.

Look at who your construction competitors are in the space

Every market is likely to have several construction businesses. That’s why it’s so important to find a niche where you can dominate.

Talk to clients

Speak with potential customers to understand what they want from your building company.

Understand your construction market

You should identify your potential client base before starting your business. Make sure that there’s enough demand for your construction services. This will be essential to your marketing, communications, sales and customer support.

Not every idea you have will make it through to becoming a construction business. There are all sorts of reasons to say “yes” or “no” to specific businesses, so think about what your strengths and weaknesses are so you can choose a business you’d be great at.

Your Construction Company Needs a Plan

A business plan is critical for a construction business. All businesses need a business model, which is how you will generate sales, provide services and make money. Think about your construction business model now, because it’s better to have that in place so you can start acquiring customers and generating revenue from day one.

You will also need to look at financial projections for your construction business. What are your expected sales and revenues? What is your profitability? How much money will you keep in the business to grow it? How much will you pay yourself and others?

If you can, try to plan your revenue for the next month, three months, year and two years.

It’s vital to take into account the cost of setting up a construction business in the first place, also factoring in utilities, staff and other costs. All of these details should go into your business plan.

Business plans do vary slightly, but they should all cover the following areas:

1

An executive summary with the most important points from your business plan

2

Your goals and what you hope to achieve with your construction business

3

A description of your construction business, background information and context

4

A market analysis and likely demand for your construction services

5

An overview of how your construction business is structured

6

Your business model

7

How you will market and sell your offerings

8

Financial projections, revenue and profitability

9

Appendices

We’ve got the perfect guide to writing your business plan.

Choose the Right Business Structure and Register Your Construction Business

Now that you have all the background information for your construction business, it’s time to make it into a reality. That starts by choosing the right structure or “legal entity” for your business. In the U.S., there are five main business structures. They are:

Sole Proprietorship

If you don’t choose to form a legal business entity for your construction business, you will be a sole proprietor by default. This won’t give you the legal protections you need, so we do not recommend this.

Partnership Company or LLC

Similar to a sole proprietorship, if you go into business with someone else without forming a legal business entity, you will be treated as a partnership. This doesn’t give you limited liability protections, so we don’t recommend it for your construction business.

Limited Liability Company or LLC

The most common type of business entity, an LLC is fast, simple and inexpensive to set up and maintain. It protects your personal finances and assets and is a great way to start your construction business.

S Corporation

This is a more complex type of business and isn't generally recommended for smaller organizations, but it could be a good fit for your construction business depending on your goals.

C Corporation

This is a more complex type of business and isn't generally recommended for smaller organizations, but it could be a good fit for your construction business depending on your goals.

For more information on the advantages and disadvantages of different types of businesses,please see our in-depth guide. If you’ve still got questions, we’ve answered them to help you choose the right business structure for your construction business.

In most cases, our recommendation for your construction business would be to create an LLC. We’ve got a complete guide to everything you need to do. LLC formation does vary from state to state, but we’ve got you covered, wherever you are.

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Setting up Your Construction Business and Business Operations

Once you've legally created your construction business, you’ll need to get some other things in place.

Marketing Your Construction Business

Marketing will be a huge part of your construction business. Naturally, you will need an awesome website, but you'll also need specialized marketing so you can find the best channels to your clients. In many cases this may be areas like trade magazines, conferences and networking events.

Construction Equipment

In addition to a computer or laptop, you will need many specialized tools for your construction business. As well as hand tools, you may also require cranes, diggers and other heavy machinery. In almost all cases, you should be able to lease or rent any equipment, especially if you only need it for a small job.

Employees

To begin with, you may want to hire independent contractors and other tradesmen for your fledgling construction company. Once you get a good idea of demand for your construction services, you can branch out into hiring permanent employees.

Software and Processes

Construction entrepreneurs make extensive use of software; see our great list of the top apps at the end of this guide. There’s also plenty of specialized software you can use to make planning and managing any construction project a little bit easier.

Location

Although you can likely do your planning from home, you’ll probably be spending most of your time on a building site. In some cases, you might even want a small office space so you can conduct meetings with other tradesmen, suppliers, architects or engineers.

Finances and Taxes

You will need a separate business bank account for your construction business. You might also want to consider a business credit card. Additionally, you will also need to keep careful bookkeeping records and file business and personal taxes. Here at Incfile we can even help you file your taxes.

The Complete "Start Your Business" Checklist

A Clear and Comprehensive Guide to Starting Your Business the Right Way

Rules, Regulations and Taxes for Your Construction Business

Construction businesses will need to meet stringent rules and regulations, especially around building codes. You will also need to get licenses and permits. We can help out with researching your construction business licensing needs.

Taxes

Taxes are a fact of life if you’re in business, and there are various ways you will need to file and pay them. This can include self-employment tax, state income tax and federal income tax. Depending on where and how you’re selling products and services, you may also be liable for sales and use tax.

As a rule of thumb, we recommend holding back around a third of your earnings to pay your taxes. We can also prepare and file your tax returns for you.

Insurance for Your Construction Business

Most construction businesses should have comprehensive business insurance. There are various types.

Workers Compensation Insurance for Your Construction Business

Workers’ compensation insurance provides coverage for job-related illnesses, disabilities or injuries that affect employees, which can be more common than usual for a construction business. Regulations for this insurance vary from state to state. It typically covers areas like medical costs, loss of earnings, compensation and retraining.

General Liability Insurance for Your Construction Business

This insurance protects your construction business from claims due to being sued. This may include injury to members of the public, property damage, personal liabilities, legal defense and more. It can help protect your business from financial penalties and bankruptcy. This type of insurance could be essential to your construction business as you want to protect anyone visiting a building site and must adhere to strict health and safety standards.

Home and Auto Insurance for Your Construction Business

If you are working from home on the administration of your travel agency or driving a vehicle for work, check whether your existing home and auto policies cover you for work use of your home or car. If not, you should either expand your policy so you’re covered or get dedicated business insurance.

Maintaining Your Construction Business

There are certain forms and legalities you need to follow to keep your construction business in good standing.

1

File an Annual Report

Most states require all businesses to file a report once a year. This report has details of any major changes to who owns a business and other major impacts on a business’ legal status. We can file your Annual Report on your behalf.

2

Pay estimated taxes

You will be expected to pay estimated taxes on what you plan to earn in the current business year. Typically, you will need to pay estimated taxes in April, June, September and January (of the following year).

3

Renew Business Permits and Licenses

Your business will need to renew your licenses, permits and other regulations every year.

4

File your taxes

You will need to file your taxes once a year.

5

Pay payroll and sales taxes

If applicable, you will need to make payroll and sales tax payments on a regular basis.

6

File your taxes

You will need to work with your accountant to prepare all the taxes you need to pay.

Groups and Forums for Your Construction Business

Here are some useful places where you can connect with other construction entrepreneurs.

Useful Online Tools for Your Construction Business

The right software and apps will make it much easier to run your construction business. Here are our recommendations for some of the best tools out there to make business operations a breeze.

Conclusion

If you have the right expertise and hands-on skills, a construction company is a great way to build a thriving business. Identify your niche, create a rock solid construction business plan and get the right marketing in place and you could be the next great home builder!

Start your Construction Company with us, today