How to Start a Building Construction Company from the Ground Up

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how to start a building construction company

If you want to make a positive impact in your community while growing a profitable business, learning the basics about how to start a building construction company can help you realize your dream. While every business venture has its drawbacks, there are many advantages of starting a company within the construction industry. A notable example of these advantages is that the construction industry remains one of the growing and largest industries in the world.

Additionally, the advances in technology have benefited this industry by expanding its offering and diversifying the business side of things. We have compiled several essential things that we believe that you need to know if you are planning to learn how to start a building construction company.

Gather Industry Knowledge

Every business requires extensive market research to be conducted before the idea can be executed. This market research includes information about the industry, customers, competitors, and market trends. The construction industry is majorly influenced by economic trends, so it is important to understand everything. Various factors can affect your budget when you are learning about how to start a building construction company.

In your information gathering stage, you need to determine whether you will be focusing on the residential or commercial building sector of the construction industry. Once you have researched the differences between the two, you will be able to clearly outline the types of materials that you will need, the projected costs, and any requirements to meet.

Fortunately, the internet provides many resources that can make this process easier for anyone who is forming a new business in the construction industry. For instance, you can use the following online resources.

  • Construction Industry Publications and Statistics
  • Local Industry Publications
  • U.S Bureau of Labor Statistics
  • U.S Small Business Administration

When you research the industry efficiently, you will save yourself time and possibly money in the future. You will acquire great information to ensure that your building construction business becomes a success.

Write A Solid Business Plan

You cannot plan how to start a building construction company without a detailed and realistic business plan. To uphold professionalism at every point of the planning process, your business plan needs to cover essential points. This will help you to raise investment funds to help you achieve your financial goals. The following are the steps that you can take to write a well-defined business plan.

Executive Summary

This is a short document or section that is used to provide potential investors an overview of the entire proposal to give an understanding of its purpose. There are appropriate guidelines on how to write an executive summary that will reach your target audience. For instance, if your company is a middle market private equity firm, you need to structure the executive summary to ensure that you attain the targeted capital investments.

Company Overview

If you are planning on forming a new business, a company overview is an essential part of the business plan. It details the main components of your plan, such as the history, mission statement, location, and legal structure. While it’s a short chapter of the business plan, you cannot reduce how significant it is.

Market Analysis

This is the section that specifies that there is a niche in the market for your construction building company. Financial planners suggest that you should include the assessment of the industry, the target market, growth opportunities, and competitor research.

Business Structure

This refers to the legal structure of the organization. If your company offers general contracting services, you need to outline how your business structure will impact any organizational actions.

Products and Services

This is where you will detail what your construction business will offer to the industry. You can discuss previous projects that you have been involved in. For instance, if you have experience owning a roofing company, you can include roofing services as part of your service offering. This will show prospective investors that your company is multifaceted.

Marketing and Sales

Here you will provide information about how you plan on reaching prospective customers and convert them. Some key focus areas to highlight in this section include the following

  • Value proposition
  • Positioning
  • Promotion
  • Sales Strategies

Financial Plan and Projections

This is an extensive overview of the current finances matched against the projected financial goals. You can use your market analysis to help you understand your financial forecasts better. Whether you use a local bank or global banking services, you should include the following documents.

  • Income statements
  • Balance sheets
  • Cash flow statements

Planning your finances will help you to plan your goals realistically. Additionally, if there are any debt obligations that you may have, you should include them to provide your potential investors with transparent information.

Appendix

This is the last section that includes additional documents or information that cannot be fit into the other sections of your business plan. These can be organizational charts, previous project information, or proof of insurance that are aimed towards giving investors the feel of your products and services.

Register Your Company

The registration process is the most important yet simple step. When you plan how to start building a construction company, you need to know the steps to successfully register your company. Below, we have provided you with some of these steps.

Step 1. Decide on a Business Entity

Starting a new business requires you to come up with a name and to decide the type of entity that you want to register. Will you be registering a middle-market private equity firm? This needs to be stipulated in the beginning.

Step 2. Acquire an Employee Identification Number

The Internal Revenue Service makes it easy to apply for your federal tax ID online. A business requires an EIN to pay taxes, apply for business licenses, open a bank account, and hire employees.

Step 3. Know how to file an S-Corp 2553 Form with the IRS

However, if your company is an LLC, you need to know that it will be handled by the federal government.

Step 4. Register with Agencies

Depending on which state your business is registered in, you may be required to do a paper registration. You can find out about your state’s requirements on the Small Business Administration (SBA) website.

You can also visit your local government website to find out if you have to register with local agencies as well.

Get Your Licenses and Permits

When you are planning how to start a building construction company, you need to know that there are specific licenses, permits, and insurance requirements that you need to meet. Your local Department of Labor can provide you with the information that you need about what licenses to get. The considerations of these permits and licenses vary from state to state. For instance, if you plan on bidding on government contracts, you can register as a government contractor. Below, are some common licenses that construction companies in the U.S. require.

General Contractors License — If your company offers general contracting services, you may be required to obtain this license. The paperwork that is required for it varies from state to state.

Specialty Contractors License — If your company will specialize in installing windows and doors, you can get a specialty license.

Get Insurance

Insurance for your construction building company is essential. When you have contractor liability insurance, you can protect yourself and your employees against workplace injuries and other accidents. Additionally, a business entity requires different specific insurance coverage options

The following are some types of insurance policies that you can have for your business.

  • General Liability Insurance
  • Property Insurance
  • Vehicle Insurance
  • Workers Compensation Insurance
  • Unemployment Insurance
  • Disability Insurance

Once you have sorted out the business plan, your company registration, and your permits, you can start thinking of the next step. The money aspect of your business is extremely important and having the next step evaluated is essential.

Look for Funding

When you are planning how to start your building construction company you will need to find out how to access and obtain a significant amount of funding. For example, if your company will be undertaking construction hauling, you may require a large amount of money to buy or lease equipment. Some business owners may require a guide to help them understand the best options for equipment.

The following are several types of business funding that we think can benefit you.

Small Business Loan

The Small Business Administration has different loan options that have low interest rates. If you have a long credit history and an above-average credit score, you can apply for a loan with the SBA. Moreover, you will have access to Lender Match, a tool that matches you with lenders that can offer you SBA guaranteed loans.

Working Capital Loans

This is a specific type of loan that you can take out to finance your business’s everyday operations such as your office utilities. If your building construction company will be highly seasonal due to the services that you provide, you can apply for this type of loan to cover any expenses that you incur during the slow seasons.

Purchase Order Financing

If you lack the financial resources to purchase the inventory that you require to complete some projects, you can apply for this type of funding from a company that offers this type of funding option. They can pay your supplier who will then get the goods delivered to the customer to ensure that the project is completed within the stipulated timeframe.

Vendor Financing

This is a different way to finance the purchasing of your inventory. However, instead of creating a financial agreement with a vendor, you can negotiate to extend your repayment plan. The advantage of this agreement is that you will not be liable for paying any additional interest or fees except for what you currently owe.

Gather your Team

Knowing the previously mentioned steps for how to start a building construction company are very important to ensure that it is a success. While the planning of what resources and requirements you will need to meet is important, you still need to ensure that you have a relatively reliable team that can execute your vision with you. For instance, if you need professional installers you may need to consider all the types of expertise that you need your team members to have.

It is important to hire people that offer a different skill set and invest in developing their skills if you feel as if some lack certain knowledge in their niche. There is a shortage in the construction labor force that has made it a challenge to find talent. This means that you may have to take extra time and effort to find a team that matches your attitude to deliver your vision and goals. As a result, you may have to search for people within your community and local colleges that you can provide with robust training and consistent mentoring.

The Bottom Line

Planning how to start a building construction company can be a time-consuming process. However, when it is done right according to guidelines it can be easier to attain your goals and to achieve enjoy the many rewards that come with it. It is important to know what government requirements need to be met for purposes of acquiring different permits and licenses.

Additionally, you will need to understand everything that may affect your financial goals. This includes ensuring that your credit score is adequate and that you meet your debt obligations accordingly. The team that you choose to execute your vision is another vital component of starting your construction business.

You may have to consider what type of skills you want your team to have as well as find ways to help them improve these skills if you believe that they lack anywhere. For instance, if you want to do a home renovation, you should find team members with expertise. Essentially, there may be certain aspects that you may have to consider and improve to ensure that your company is successful.

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