If you are an entrepreneur starting your business, no matter the type can be an exciting and overwhelming journey. Many things are involved, including research, reporting, and also paperwork. So, it’s easy to get lost in all these things and forget the reason as to why you’re starting your business. But, when you plan yourself, the process can be very easy.
Construction is among the top businesses to start. But sadly, it also has the lowest success rates. According to research, 60% of construction companies don’t make it past five years for different reasons. However, this isn’t to discourage you. Having a good plan to run your business and getting the help you need are the key things to help you run a successful construction business. If you’re wondering where to start, here are some tips to get you on the right foot.
Conduct a Market Research
You cannot successfully run a business if you don’t understand your market. So the first step should be to understand whether you’ll gain profit from your construction business within your area. Learn about construction market trends by asking industry publications. You can also use the U.S. Small Business Administration to find the information you need.
You also need to know how other construction companies are doing, their offering, charges, and reputation. It’s also important to learn about the community you want to offer your construction services. So, talk to residents and business owners within.
Choose your demographics wisely. These are people that will purchase your services. You need to ensure that they want them and can afford them.
Decide on the Location
Location can make or destroy your business. Choose the right location, and you will have an influx of customers. But if you choose the wrong location, you may close your business sooner than you thought.
You’ll also need to set up an office where you can run your administrations, store your tools, and par your vehicles. If you don’t have the money for an office, you can choose to start the business by working from home. But as it grows, you will need an office in a convenient location.
Also, remember that even if you operate the business solely from home, you will still need a special license for that. Again, you will have to budget for some office-related expenses like a phone line, an address, if you want to keep business mail separate from home mail, and a business phone.
Get the Capital Needed
Unfortunately, starting a construction business is not cheap. The costs usually vary depending on the location and the company’s services. But, keep in mind that you will buy or lease construction vehicles, tools, and equipment. Also, there are some bulls you have to pay and salaries.
Budgeting is crucial during this period to ensure that you cover everything. If you don’t have enough funds, you can ask for help from the U.S. Small Business Administration. You may get approved for traditional loans. Additionally, remember that the government offers grants to start-ups. So check grants.gov to determine whether your business qualifies.
Having the best credit card for your construction business is also essential as a business owner. But please choose it wisely. The right card for you depends on your needs. Remember that a small business owner doesn’t have the same needs as someone running a large enterprise. Some cards also offer travel rewards which you should consider if you’re a person who travels a lot. Others come with a cash reward that will eventually be useful.
Register Your Company at the State Level
Your business will not be considered legit if it is not registered with the state it is operating in. Registering your business in the United States varies from state to state. Therefore, consult with the Secretary of State to know what’s needed.
Make sure that you have a unique name for your company before filling in the paperwork. It’s important to confirm whether your name is available with the state’s filling agency. Additionally, check with the U.S. Patents and Trademarks office that no other business has trademarked the name.
Again, you need to educate yourself about the different types of business structures available before settling on any. Remember that each structure has its pros and cons, fees, and legal requirements. For instance, if registering a sole proprietorship or partnership, you’ll enjoy tax benefits. But, you won’t be protected from personal liability. On the other hand, corporations protect business owners from personal liability, but they feature a high tax rate. You may also consider registering an LLC that offers personal liability protection and tax benefits.
Register with the IRS
Your business needs an Employer Identification Number issued by the IRS to comply with federal laws. Thankfully, applying for this number is easy. You only need to visit the IRS website and follow the given steps. But you can also apply by mail, fax, or over the phone by answering a few simple questions.
Get the Needed License from Your State
You cannot operate a business legally without a general state license in your area of operation. You may also need to get a specialty license depending on your offerings. For instance, if you provide some construction services like plumbing, electrical or HVAC, you may need a tradesman license depending on your state. Also, you may need a contractor’s license to run a construction business.
Note that licensing laws are different in states. Therefore, check with your state’s licensing office for the right license you need.
Insurance protects you and your business. But you will need several coverages to ensure that you’re fully protected. For instance, you may need property insurance, liability insurance, commercial vehicle insurance, etc. Additionally, if you have employees, you will need additional insurance. Some states require companies to have worker’s compensation insurance, disability insurance, and unemployment insurance.
Note that the insurance you need depends on your business’s nature. So, it’s wise to consult with an expert insurance agent for the right coverage.
Secure the Surety Bonds
These are bonds protecting your clients. They ensure that the customer is paid back if you can’t complete the project you were hired for. Construction companies are mandated to have these bonds. But the requirements vary in different states. So, look up what is required on your state’s website or contact a surety bond agent for advice on the right coverage for you.
Remember that you have to prove to the surety bond provider that you’re an expert in your field and financially secure for your application to succeed. These bonds usually charge 0.5%-2% for the project’s total cost.
Follow the Set Industry Regulations
Don’t start accepting requests before you comply with the various laws set for construction companies. You need to know the energy efficiency standards and how to dispose of dangerous materials like lead and asbestos safely. You also need to know the Occupational Safety and Health Administration (OSHA) regulations, Environmental Protection Agency standards, etc.
Also, bear in mind that you will need a building permit. So know the process involved in applying for these permits within your area. Again, ensure that you update your work as per the building code standards in your place; otherwise, it may bring problems during inspections.
Check Your Tax Obligations
All business owners are mandated to pay business taxes. Therefore, it’s essential that you know all your codes and expenses. If you’re having a hard time with this, consider hiring an accountant or a bookkeeper to manage your company’s accounts.
Purchase the Equipment You Need
You cannot function without equipment. But many business owners make the mistake of purchasing more than necessary. Since you’re only starting, your equipment requirement isn’t that much compared to a large company. But, it is essential that you get the right one for your projects. The needed tools vary depending on the services you offer.
If you don’t have a large budget, consider buying used equipment. Also, weigh out between buying and renting, the most suitable option for you.
Some business owners do everything for themselves when starting. But as your company progresses, you will need the help of skilled and experienced workers. You can post job vacancies on popular job sites such as Monster or Craiglist. Ensure that you get the right pool of talent for your company.
If you have a steady workflow, consider having full-time and part-time employees to save money. Note that hiring employees also means additional expenses like paying salaries and benefits.
Alternatively, you can think of hiring independent contractors or subcontractors. This route is more flexible since you don’t have to pay workers after every stipulated period. Plus, if you’re displeased with a particular contractor, you can always cease working with them for the next project.
Network with Other People
You’ll need to get your business to the community if you want it to succeed. Consider joining a community of organizations if it’s available. This is a great way to connect to people who can help your business grow. Bear in mind that the more connections you have with the local community, the easier it will be to let more people know about your business.
It’s particularly important to build a close relationship with developers, building inspectors, subcontractors, and suppliers. These individuals will help complete your projects and refer your business to other clients.
Develop a Marketing Campaign
Marketing a business, no matter the type is very crucial. It’s the best way for people to know about its existence and purpose. So ensure that you allocate time and money to it right. The first step is to make your website up to date with user-friendly features. Also, make sure that you’re active on social media and post reviews and ratings from your customers for other people to see.
Remember to invest in high-quality marketing materials such as postcards, business cards, and flyers. Design a professional logo and ensure that it is consistent on all marketing platforms. Take advantage of word-of-mouth marketing. It is a simple and cost-effective advertising method.
You can consider TV, newspaper, billboard, and radio advertising if your budget allows. Attend trade shows whenever you can. This will connect you to potential customers and inform them of your offering.
Knowing your target audience is essential for a successful marketing company. Consider budget, lifestyle, and work scope when determining your target customers. Once you are specific with your audience, you can channel your effort to them. This saves you time and money.
Learn to Bid
Accurate quotes and deadlines are essential to securing jobs. You can take advantage of management software to help with this. Please remember to offer fixed quotes and refrain from making promises you can’t fulfill. But remember that you will also need to be competitive.
You can hire an experienced bidder to help with this. This person can quote jobs, allowing you to focus on other projects. The same person can also do administrator jobs like collecting payments and submitting invoices.
Grow Your Business
You need to put effort into growing your business. Some things that can help you are customer loyalty and reputation. Try as much as possible to leave all clients satisfied by being honest and communicative. Be transparent about how long and how much the project will take. In case of any problems, update them immediately.