Maybe you’ve been thinking about starting your very own construction company but have been having some apprehensions about it. Well, it’s perfectly understandable why you would have second thoughts about it. It’s no walk in the park, and it’s certainly not like grabbing your toolbox and going to a project site. To start a construction company, and a successful one at that, it’s going to require a substantial amount of research, planning, and funding.
In the ever-evolving world of startups, the construction industry is one of the top industries, if done right. In that same token, the construction industry is also one of the industries with a very high failure rate. But why are these startup construction businesses failing? Well, it could be due to lots of reasons. The biggest reasons lie within the “lacks”:
- Lack of funding
- Lack of construction business knowledge
- Lack of planning
Out of those three “lacks,” can you determine which one is the most important one? If you guessed planning, then you guessed correct. When you have the proper plan in place, everything else will fall into place. In your planning, which would be your business plan, you can incorporate how you plan to obtain funding and how you plan to obtain essential knowledge on the business. But nothing is going to work if you don’t include it in your business plan.
Your business plan is the biggest essential to starting your own construction business, but you also have to consider the other important aspects of it as well. Everything from getting your business registered and insured to funding your equipment all plays a significant role in the success of your construction business.
Take a look at the top essentials needed to start a successful construction business.
Startup Construction Business Essentials
1. Funding Your Equipment
When most people think of construction equipment, the first thing that comes to mind is those massive yellow machines that can haul large loads and get it from one area to another. Well, when people picture those massive machines in their minds, they never thought about how much they cost.
In starting your own construction business, you’re going to need various tools and equipment to complete the construction projects you take on, but the real question is, how are you going to pay for the equipment?
In your mind, you might be thinking that you want to buy all new equipment – new business, new equipment – everything has to be new. But upon doing your research, you discover that construction equipment can cost hundreds of thousands of dollars. Unless you have $200,000 for an excavator in your back pocket, new equipment isn’t going to be your best option.
Instead of having your heart set on new equipment, explore the benefits of buying used construction equipment. If that’s still a little out of your price range, you always have the option of renting construction equipment as well. This will prevent you from having to spend so much money upfront.
2. Getting Your Business Insured and Bonded
If you’re going to start a construction business, one of the most important business moves you can make is to get your business insured and bonded. Did you know that OSHA determined that the leading cause of death in the construction industry is the Fatal Four? The Fatal Four is
- Being electrocuted
- Being struck by an object
- Getting caught in between something
If these four work hazards were to be eliminated from the construction industry, over 600 construction workers’ lives would be saved. But because the death toll is so high in this industry, it’s crucial to have some form of business insurance policy that has a workman’s comp policy.
In addition to getting your business insured, you also need to make sure your business is properly bonded. In the world of construction, it’s important that you know that “things” happen. Whether it’s a delay due to weather or the injury of a worker, things can happen that cause you to sometimes neglect your contractual agreement.
When that happens, you’re going to need a reliable surety bond to pull your business through as an added form of financial coverage. You’ll want to make sure you do your research on the most trusted and learn more about construction bond companies.
3. Getting Your Business Funded
As you already know, starting a construction business is no cheap thrill. Trying to fund the equipment alone can make your business go belly-up if you don’t approach it appropriately. Fortunately, funding your business altogether isn’t impossible to do; you have to look at all your funding options. If you notice, “options” is key here. All too often, people think that when it comes to funding a business, you can only utilize one source of funding, and that’s not the case at all.
Funding your business can come from multiple sources. Things like SBA loans, business term loans, and SBA microloans are all options you can use to get your construction business off the ground. Your funding is going to cover everything from the financing of your equipment and marketing costs to hiring employees and a vehicle fleet.
Because you have so many financial factors to consider, it’s very important to have a well-thought business plan. Your business plan is going to be the very thing that puts your business strategies, goals, and projected expenses into perspective and helps you determine if they make sense and if they’re realistic.
The projected expenses and revenue are what lenders are going to focus on mainly. They need to see that your business ideals are achievable and, more importantly, profitable. If you can assure them through your business plan that your construction company will be a good investment for them, they’ll have no problem lending you the money you need for your startup. But you first have to make sure your business plan has a very detailed layout for the funding and thoroughly explains how you’re going to be able to pay the money back.