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Start A Commercial Builders | General Contractor Business

Build A Future

One of the more lucrative businesses available to young entrepreneurs is the construction contractor business. But beware, it also has a high failure rate. Data from the past two decades reveal that nearly two-thirds of commercial builders filed for bankruptcy within the first five years. While there are many reasons for their failures, one critical obstacle does not have a solid business plan. The construction business involves a great deal of money. You must understand the industry’s complexity. We recommend that anyone joining the construction contractors business thoroughly research their local market and perform a detailed industry analysis.

Learn About The Commercial Builder’s Business

Building a commercial general contractor business takes time, and many things can go wrong. Studies reveal that people who fail regret not learning the construction business basics. So, before considering opening a business, take some time out and read as much as possible about starting a construction business. The more you know ahead of time, the better prepared you will be to meet the challenges.

Here are some links to get you started

Check Out Other Local Construction Companies

Currently, the commercial building industry is experiencing a boom. However, this does not mean there’s a lack of construction companies ready to service those jobs. You’ll need to find out if there is room in your area for a new construction company and what type of demand is present. In many big cities, the market for construction companies is quite saturated, and most customers know the products and prices and are content using well-established companies. Thus, establishing a foothold can be difficult. Your construction business should be located in an area away from other competitors but preferably in a place where there is ongoing construction.

Finally, you will need to check out your local zoning laws. Are they limiting new businesses from operating in specific areas altogether? You will need to visit the local Chamber of Commerce to determine the zoning ordinances in your area.

What’s Trending In The Building Industry?

Large construction companies are moving towards obtaining contracts that include numerous services to respond to a decline in growth. For example, many companies favor work, including structural work, electricity, plumbing, etc.

Therefore, the trend is towards organizing numerous construction trades to offer clients an all-in-one solution.

Public-private partnerships (PPP) are also reviving the construction market. The system is simple: a public establishment entrusts a private company with a contract, such as building an infrastructure project. From construction to maintenance, private building companies take care of everything.

Search US Small Business Administration (SBA)

You need to search the SBA website to find complex data on the construction business market and potential customers. Here you can look up the demographics of the population and local businesses, their spending habits, and employment status. You can also look up sales statistics and production in the construction market. The SBA provides general information, but you will need to research local industry publications to get more in-depth into local companies.

Here are a few government links you might want to visit

IRS Website

This site by the IRS is a must-see when beginning your LLC

Market Research: An Essential Step In Opening A Construction Company

Market research is the first step in setting up a building business. The objective of the market study is to allow you to validate the commercial opportunities in your chosen area.

To do this, you will need to learn about the current market supply and demand. In particular, you should be able to answer the following questions:

How many competing companies are there in your area?
What types of projects are they targeting (public contracts, individuals, business projects)?
Is demand sufficient to allow a new player to enter the market?
What are the prices charged by the competitors?
How do they find their workforce? How easy is it to find qualified staff? Etc.

You will also have to study the significant market trends to position yourself in a promising niche.

Be A Quality Construction Business?

You should be aware that your potential clients generally have no loyalty to big businesses; they’ll shop around for low prices and discounts. Thus, it is vital to start building a reliable customer base from day one; this means:

Be honest with your customers about any project you undertake. Tell them the approximate time of completion, the anticipated costs, and potential issues that may occur
Communicate with them as much as possible
Do not nickel and dime them for every service.
Meet your contract obligations

Building Contractors Business Plan

Once you discover a demand for a new construction company, you’ll need to create a detailed business plan to help anticipate future issues. The business plan should contain the following:

Who is your competition, and in what do they specialize?
What are startup costs for a construction business?
What will you charge for your services?
Who are your customers?
What permits and licenses will you require?
What are the negatives of opening a construction business in your area?
Where will you get the necessary funds to open your construction business?
Will you need insurance?
What type of construction jobs will you quote?
Will you be hiring other contractors, and how often?
How many employees will you hire?
How will you market your business?
How much money will you need to maintain the company for the first 6-12 months?
What is the local construction industry situation? Is it expanding?
Is there a growth opportunity now and in the future?
What percent of the market will you be able to capture?

Here are some online sources for your business plan

Advanced Construction Business Identity

Register the business with the local Chamber of Commerce
Obtain an EIN
Open a dedicated bank account and credit cards.
Register for state and federal taxes

Create A Legal Identity

It is essential to incorporate your business because it can provide legal protection if there is a lawsuit.
Because the construction business is fraught with injuries and accidents, you will need to obtain liability insurance, workers’ compensation, and general insurance to protect your property and equipment against theft, fire, and vandalism.
You will also need auto and builder’s risk insurance.

Master Construction Business Incorporation

Check out these few companies that can assist you in getting your LLC started.

Construction Business Licenses And Permit Requirements

Every state has its own rules and regulations that govern a construction business. The type of license and permits will depend on your business’s location, size, and the type of construction services you offer.
If you are involved in transportation, mining, or drilling, you must obtain federal permits. For example, you need a special license to use oversized vehicles for transport.

Construction Companies Emergency Funds

You should be aware that the construction business’s net profit margins are not high so emergency funding will be a constant necessity. You should also be aware that customers may only fund a specific portion of the job, so you may be cash-poor for many months while beginning projects. Plus, the construction business is seasonal. Thus, it is crucial to have emergency funds to help support the company for at least 6-12 months.
Is there a growth opportunity now and in the future?
What percent of the market will you be able to capture?

How Will I Fund My Commercial Builders Business?

If you do not have your own cash reserves, you will need to apply for a loan. Besides banks and private lenders, you can use credit unions or a government program. Since startup costs are high, you will need a solid credit rating and a sizable downpayment to secure any loan.

Here are a few of your options

Small Business Administration

The Sma ll Business Administration, SBA has a program to fund new startups and is worth a look

What Type Of General Construction Co Will You Start?

The types of construction business include the following:

Non-residential and residential buildings
Heavy engineering industry such as highways, dams, bridges, utilities, water systems, roads, etc
Industrial construction typically includes chemical plants, refineries, power facilities, and the manufacturing industry.

The type of industry you service will depend on your knowledge, skills, and demand.

Building Company Premises

Although it is no less important than beginning a business, your choice of physical location remains essential for a construction company.

Here are some criteria to consider:

Size: the area must be large enough to allow you to store your equipment.
Security: you must be able to leave your gear there without the threat of theft.
Location: easy access and plenty of turnaround space for trucks to pick up their materials.
The ability to park: ideally, you and your employees and clients should be able to park nearby.
The rent amount: here, you will probably be interested in favoring an area on the outskirts or in an industrial zone over a location in the city center.

Do not hesitate to consult real estate agencies, websites, and newspapers to find the best commercial lot.

Here is a list of some popular commercial real estate companies:

Staffing, Construction Crew

Starting a construction business cannot be improvised. You must be aware of the skills required of your crew. As a business manager, you will have to employ in particular:

Financial management: Your managers will need to handle quotes, budget monitoring, supply chain management, etc.
Staffing: Recruitment, payroll, training, preparation management, etc.
Consider employing an accountant to relieve you of specific administrative tasks (accounting, payroll, VAT, etc.).

Your managers must recruit qualified personnel with a diploma or significant professional experience.

Staff punctuality or lack thereof can quickly become a significant financial issue. Therefore, you will need to trust your employees and site managers to arrive on time on construction sites and work full days. To this end, surprise site visits can help maintain discipline among the staff.

Check out some of these recruiting links

Form Your Commercial Building Contractors A-Team

The construction business is not a solo venture. You’ll need to have a large team; construction has many components. Forming a team will lead to more resources and open up more avenues for growth. Seek successful partnerships and network with other construction business professionals like industry associations, CPAs, and construction lawyers.
Plus, you will always have someone who can advise you on specific construction matters with a team. The earlier you develop a reliable and strong foundation with a good team; your business will likely succeed.

Create A Building Contract

It is vital to possess a contract for all your jobs in the construction business; unexpected delays can occur due to traffic, weather, or the equipment may not have arrived. Unexpected events can influence the outcome in many different ways. No construction should be performed just based on an oral agreement.
In the contract, write down the timelines of the project and possible causes of delay.
Include the agreed-upon payment, how much is upfront, and when your client should pay the balance.
Always write in a claim for extra work that may occur.
State when the client can get a refund and under what circumstances
Read over the contract with an attorney to make sure it is legal. Clients generally develop trust and loyalty when they feel that the agreement is fair.

Here are some links to get you started

Construction Equipment

The building sector encompasses many enterprises, from painting to electricity, including window installation. Usually, the equipment is bulky. You must organize yourself, choose a suitable location, and manage your stock methodically.
You will also need one or more professional vehicles. You can buy them or opt for a lease or rental (finance lease or long-term rental) to reduce the initial investment. In addition to the acquisition, you will also need to consider the cost of servicing, maintenance, and fuel for vehicles and equipment.
Regarding the quality of the material, take care to call on several suppliers to compare the proposals. The goal? Choose the offer at the best quality/price ratio.
Finally, do not forget to take out the necessary insurance: ten-year insurance, professional liability insurance, insurance equipment, etc.

Here are some links to construction supply companies

What Type Of Equipment Is Needed For A Construction Business?

Your equipment needs will depend on the type of construction business you choose to be involved in. Because construction equipment is expensive, renting may be a far better option initially. The type of equipment you may need includes:

Articulated Hauler
Asphalt paver
Backhoes
Boom lift
Bulldozers
Cold Planer
Compactors
Cranes
Drum roller
Dump trucks
Excavators
Feller buncher
Forklift
Graders
Harvester
Knuckleboom loader
Loaders
Manlift
Pavers
Pile Boring machines
Pile driving machines
Scissor lift
Skid steer loader
Skidder
Telehandlers
Towable light tower
Tower cranes
Trenchers
Trucks
Wheel tractor scrapers

Conclusion

The construction business is not easy by a long shot. Because of the services’ complexity and competition, performing a market analysis is vital. This industry can be profitable but requires hard work, a team approach, and excellent customer service. Those who remain dedicated usually go on to develop a successful business that thrives year to year.