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Becoming a Contractor: How to Build Your Own Construction Company from the Ground Up

Becoming a Contractor: How to Build Your Own Construction Company from the Ground Up
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The economic crisis of 2008 struck a number of industries, and the construction industry was no exception. But after a couple of years, it seems like the construction industry is finally growing at a healthy pace. According to the US Census Bureau, total value of construction put in place this January was $1.2 billion.

If you’re not aware. That’s a $35 billion increase – or more than a 3% increase – compared to the month of January 2016. The increase is even a lot stronger on the residential side of the industry, which grew 5.5% during the last 12 months.

But while things are looking good for the industry as a whole, individual companies now face more competition and risks than before. That’s how construction CEOs feel anyway.

According to last year’s Engineering and Construction Industry Trends report around 46% of CEOs believe that their companies face far more threats now than only three years ago. And this is why so many new contractors fail – not because they aren’t skilled enough – but because they don’t know how to run a business and overcome various threats.

What do You Need to Start a Construction Business?

The things is, being a successful contractor involves more than knowing how to hammer a nail correctly or how to use a circular saw. There are licenses you need to apply for, there’s equipment you need to buy and there’s maybe even training you’ll need to complete.

But don’t worry, if you manage to construct (no pun intended) a solid business plan and figure out the direction you want to take, you can start your business just in a couple of months. But before we start talking about the specific, let’s take a better look at what it means to be a constructing company.

For starters, you need to be aware that the construction industry mainly consist of three main sectors, which include:

  • Industrial – it includes refineries, manufacturing facilities, mills and chemical plants
  • Infrastructure – it includes large-scale projects like highways, bridges and roads
  • Building – includes both residential and non-residential buildings and houses

And before you pick your particular niche, you should take a look at your skills, think about who’ll finance your company and what will you do yourself, and what will you need to hire someone for, among other things.

A smart thing would be to do a SWOT (Strengths, Weaknesses, Opportunities, and Threats) analysis – Smart Sheet has a nice list of SWOT templates – which will allow you to assess your skills and decide where you want to take your business. All of this brings us to the first entry on our list…

Developing a Business Plan for Your Company

Before you start looking for investors or buying new equipment, you need to make a solid, well-thought-out business plan.

And even though a business plan might sound too serious for inexperienced, first-time entrepreneurs, there’s nothing to worry about, because your plan doesn’t have to be complicated at all. It basically something that will help you organize your employees, set your priorities and make smart decisions.

And here are a couple of things you should cover in your business plan:

  • Executive summary – this is an overview of your organization that explains who are you, what are you planning to do and where you’re planning to do it
  • Company mission – despite its serious name, your company’s mission should only be a short statement that explains why your business exists and what sets it apart in the current market
  • Personnel plan – in this segment you should outline the number of workers you plan on hiring, whether they’re employees or contractors and their expected earnings
  • Financial blueprint – this segment should be a little more detailed and it should include things like projected cash flow, profit, loss and a break-even analysis

Registering and Legitimizing Your Company

When it comes to legal issues, you need to know that the construction industry is highly regulated. Therefore, you have to familiar with the laws, code and OSHA practices and regulations your company will have to comply with. And yes, most of these laws vary from state to state.

So when it comes to your region, you’ll need to have the proper licenses, permits and insurance. And this applies even to part-time construction companies. So if you want start on the right foot legally, you’ll need to:

  • Get familiar with building codes that are used and enforced in your state, like the IBC (International Building Code)
  • Be aware of safety practices and the personal protective equipment for your workers, which is almost always mandated by OSHA
  • Every state in the US has different classes of construction companies, which means different limits and regulations apply to each
  • Lastly, you should get an accountant to deal with taxes and you’ll definitely need to get liability insurance and a bid bond if needed

Marketing and Branding Your Company

Although some people think that branding is reserved for large corporations like Starbucks and Disney, the matter of the fact is, your brand will prepare your potential clients for an experience they are willing to pay for.

But branding is not only important to consumers, according to Reuters, roughly 82% of investors believe that name-recognition is the number one factor in their investment decisions. So basically, your brand will not only attract new customers, but big investors as well.

So how much money should you spend on your marketing and branding efforts? Well, most professionals recommend you should spend up to 10% of your overall revenue on marketing. And keep in mind that branding is only a part of that budget.

Final Thoughts

And if you’re in doubt about starting your own construction company, don’t worry, as the US Small Business Association – and a number of respectable publication including Forbes – has pointed out, construction is a high-growth industry and will probably remain strong for years to come.

It’s quite simple actually – whether for commercial use or a residence – someone has to build those buildings, systems and roads millions of people use in their daily lives. And as yeas, as we said before, the industry has had its ups and downs, but it’s certain that construction will always be in demand.

And as they say – where’s demand, there’s opportunity. So while planning, funding and starting a constructing business may be a difficult task, with the understanding of the work you need to put in, in order to get your business of the ground, you’re now ready get what you need and get started.

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