Building a new home or building may seem like a matter of slapping mortar between bricks, but there’s a lot that goes into it! Materials, labour, design, permits, insurance… it’s never simple. And that’s just one project - easy pickings compared to what it takes to build a whole company that can do it over and over again, especially if you want to turn a profit. It helps if you have a friend who works in crane sales, but if you’re not so well connected, we’ll walk you through the basics.
Before you get started, it’s good to know what you’re doing! And while someone looking to start a construction business from scratch might often be a budding entrepreneur with a business degree and some good outside financial backing, or a venture capitalist who thinks they know how to play the market, it really helps to know the industry from the inside. Many successful builders start their careers as tradespeople or real estate agents, learning the ins and outs of the business before they try to make it on their own in the big leagues. People in these professions will gain first-hand exposure to the supply chains, regulations, logistics, and various bureaucratic details involved in building new residential or commercial structures.
Like any business, a construction company has to start at the beginning: a good business plan. Defining your target market, understanding the competition in that market, and planning how your company will carve out a niche amongst that competition are some of the most important aspects of building any business. That might apply to construction more than most industries: with average net operating margins as low as 2%, it’s important to know what you can do, and do it well.
Ps & Qs
This is where things get tricky. Construction is a very capital-intensive business. Building equipment and materials are not cheap, especially in the quantities required to build profitably and consistently. This means you’re going to need to secure substantial funding, and that’s much easier said than done. If you have a strong reputation in the industry, you may be able to acquire credit: a bank loan and equipment financing might be a viabkeen eye for personalitiesle option, but if that’s not possible, you’re going to need investors.
Once you’ve got solid financial backing, the next step is registering a business and acquiring the appropriate licenses. License requirements vary dramatically by country, state, or even municipality, and ensuring that you meet all of the requirements in your locale is crucial to ensuring that your company not only continues to exist but can even get off the ground at all.
Like any company, an owner of a construction company would be wise to retain an accountant and lawyer who are familiar with the industry to be sure that they comply with all laws and regulations, and pay all of their taxes and employees on time and in full. Failing to meet these basic bureaucratic requirements is some of the simplest and most common ways companies of any kind get into trouble with the law. It’s hard enough to run a company without the government breathing down your neck - make sure you pay your dues, cross all your t’s, and dot all your i’s, or it’s going to be even harder!
Down to Business
After jumping through legal and financial hoops, you’ll need equipment and employees. It takes time, patience, experience, and a keen eye for personality to build a company that can get the job done reliably, on time, and at a high standard of quality. As with legal and financial compliance, this is one of the aspects of running a business that many never succeed at. Construction requires project managers to draw on a wide variety of talent: architects, engineers, project managers, accountants, and a host of tradespeople will be needed to complete any construction project. Given the tendency amongst many people of these professions to self-employ, finding the right talent often requires a mix of hiring and contracting to get the job done. This makes networking crucial for owners and directors of construction companies.
A good network helps with sourcing, too. Construction requires a plethora of materials, not to mention tools and heavy machinery. While buying a few screws or 2x4s at retail cost is inevitable, acquiring everything needed in retail isn’t going to be conducive to a high-profit margin; sourcing directly from industrial suppliers in large quantities is always preferable.
With all of the pieces in place, the final obstacle is acquiring customers. Marketing strategy varies widely between different specialties in construction: advertising to aspiring homeowners is often done through traditional means of billboards, TV commercials, and advertising online or in local publications, but building major commercial projects or large volumes of residential homes will require attending trade shows, networking, and more carefully targeted advertising to real estate developers and various other corporate clients.
Once you’ve acquired clients, it’s all down to running the business properly, supervising projects, and delivering products on time at a high standard of quality - once again, easier said than done!
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