How to start a construction company in the United States

Most construction businesses fail in the first year or two, so it's crucial to plan ahead and make sure you have all the necessary tools and resources in place.

It can be easy to lose sight of your initial passion for starting a construction company and get lost in the administrative details. Just make sure to stay focused on the essentials and don't forget why you started your own business in the first place.

To help you avoid common pitfalls and ensure your success as a construction company owner, we’ve put together this guide on How To Start A Construction Company and help you find potential customers quickly.

Keep reading for tips on planning your business, securing funding, hiring employees, and more!

1. Research the construction industry

The construction industry is a vital part of the economy, and it's important to do your research before starting your own construction business. There are many factors to consider, such as the current market conditions, the competition, and the cost of doing business.

Conducting industry research will give you invaluable insight into your target market and help you make informed decisions about your business. By understanding the trends and dynamics in the industry, you can position your company for success.

Gather data from a variety of sources

In order to make informed decisions about your business, it's important to gather data from a variety of sources. By understanding the trends and dynamics in the construction industry, you can position your company for success.

Gather data from industry reports, trade journals, online forums, construction industry publications, and other sources to get a comprehensive view of the industry. Make sure to collect data from both national and local sources, such as local industry publications to get a complete picture of the market. This information will help you understand the competition, identify potential customers, and assess the feasibility of starting a construction company. By understanding what your competitors are doing, you can make strategic decisions that give you an edge over them, and be at least one of the best local companies, if not the best construction startup in your state.

Analyze the data to identify trends and opportunities

The data you collect can help you identify trends and opportunities in the construction industry. By analyzing this data, you can gain a competitive advantage over the competition and find new ways to grow your business.

There are several methods for analyzing data, and each has its own strengths and weaknesses. The most important thing for small business owners is to select the method that best suits their needs and use it to extract the maximum amount of information from the data, and gain valuable market insights.

Some of the most common methods for analyzing data are:

- Statistical analysis

- Pattern recognition

- Market analysis

- Competitive analysis

- SWOT analysis

Develop strategies based on the findings

Once you have analyzed the data and done your market research, it is important to develop a strategy based on the findings. The goals of the strategy should be specific and measurable so that you can track your progress and make adjustments as needed.

The strategies developed from a SWOT analysis should address the weaknesses and threats identified in the analysis. For example, if your company is weak in terms of capital, you might want to consider seeking outside investment. If you are threatened by competition, you might want to focus on developing new products or services.

The strategies developed from market analysis should focus on understanding customer needs and preferences. This information can be used to create new products or services that meet these needs. You can also use it to determine the feasibility of starting a construction company in a given market.

The strategies developed from statistical analysis should identify relationships between different variables. This information can be used to develop new products or services, or improve current ones. It can also help you understand how the construction industry is changing and identify potential opportunities for growth.

Evaluate the strategies to determine their effectiveness in your construction business

Once you have analyzed the data and developed a strategy, it is important to evaluate its effectiveness. This will help you determine whether the strategy is working and needs to be adjusted, or if it should be abandoned altogether.

There are several ways to evaluate the strategy of your construction company. The most common method is to compare actual results with desired results. If the two are not aligned, then the strategy needs to be revised. Another way to evaluate a strategy is to measure how well it meets the goals set for it. This can be done by comparing actual results against objectives or by calculating a return on investment (ROI).

Finally, you can also evaluate a strategy by looking at how well it conforms to accepted business practices. For example, you might compare it to industry benchmarks or best practices of others in the construction business.

2. Figure out your business plan and goals - all successful construction companies did it

Many entrepreneurs underestimate the importance of a business plan, which is also a great company overview for potential investors who can help you maintain a healthy cash flow. A well-crafted business plan is a critical document for any new business, regardless of industry, if you want insight into your business's future success. It helps you clarify your business goals and strategies, and it also makes it easier to raise money from investors or lenders, learn more about your target market, etc.

To start a construction company, you’ll need to create a construction business plan that outlines your company’s objectives, the company's services, strategies, and financials.

Once you have a good understanding of the construction industry, you need to figure out what kind of company you want to create.

Here are the steps you’ll need to take if you want your new business to grow:

Create a financial model

A financial model is an essential part of any business plan. It outlines your company’s projected income and expenses over a period of time. This information in your business plan will help you determine if your business is viable and how much money you need to raise in order to get started. If you don't project your cash flow, you may face company closure as a result of insufficient funds.

Draft your marketing strategy

Your marketing strategy should include both short-term and long-term goals, as well as a detailed plan for how you will reach your target customers. You should also outline your pricing strategy and identify your key competitors. This is one of the crucial elements of your business plan and a big part of your business strategy.

Outline your organizational business structure

Your organizational structure defines how your new construction company will be organized and managed.

One approach is to use a traditional hierarchy, with a CEO at the top making decisions and controlling the flow of information.

A more flat structure can be more effective in a construction company, where everyone needs to be able to share information and make decisions quickly.

No matter what structure you choose, it’s important to define who is responsible for what tasks and how decisions will be made.

3. Get Registered and Licensed

Before you can start a construction company, you need to be registered and licensed with the appropriate government agencies, such as the Small Business Administration. This typically includes registering your business name and applying for a business license, or specialty contractors license if you are specialized in something within the construction industry. Depending on your location, you may also need to obtain a contractor’s license or bonding.

Check with your state and local governments to find out what is required in order to operate a construction company. Most government websites, such as Small Business Administration website, have detailed information about the licensing process and detailed steps, so it’s important to do your research before starting the registration process, and learn how to start a construction company, apply for SBA loans, or even become a government contractor.

Also, you will need a business bank account, don't forget that, so you should check financial institutions and find which one best suits your company.

Register Your Business Name

In order to register your construction business, you need to choose a business name. You can check with your state or local government to see if there are any restrictions on the names you can choose.

Once you’ve selected a name that best describes your construction services, you need to file a “doing business as” (DBA) statement with your state or county government. This will allow you to use the business name in official documents and transactions.

Apply for a Business License

After registering your business name, you can apply for business licenses. This document allows you to operate as a legitimate business entity. The requirements and fees for business licenses vary by location, so be sure to check with your state and local government websites for more information.

Most applications require basic information about your company, such as the name, address, and type of business. You may also be required to provide documentation about zoning permits, health and safety inspections, and other licenses or permits that are specific to the construction industry, such as a general contractor's license.

Contact Your Local Chamber of Commerce or Industry Association

If you’re not sure where to start, or how to register your company (as a limited liability company, for example) contact your local chamber of commerce or industry association. These organizations can provide you with resources and assistance to help you get started with your construction company.

They may also have directories of contractors, construction projects, or other businesses in the industry that can help you get started.

Get an Employer Identification Number

You will need to get an Employer Identification Number (EIN), also known as a federal tax ID. This is a unique identifier that is assigned to a business entity so that it can easily be identified by the Internal Revenue Service (IRS). The EIN is made up of nine digits and is formatted as XX-XXXXXXX. There are several reasons why you may need an EIN, such as if you have employees, operate as a corporation or partnership, pay business taxes, file certain tax returns, gain tax benefits, or withhold taxes from income other than wages. You can apply for an EIN directly through the IRS website, and they usually issue them immediately.

4. Secure Insurance & Liabilities

No construction company is complete without insurance. Many states and local governments require general liability insurance for construction companies before they will issue a license. This type of insurance protects you and your personal assets in case someone is injured on your job site, and this is particularly important for new business owners. As a business owner, it’s important to understand the different types of coverage available and make sure you and your personal assets are fully protected.

There are a variety of insurance options available. The most common type is general liability insurance. Other options include personal liability insurance, property insurance to secure company property, unemployment insurance, state disability insurance, workers’ compensation insurance, which provides benefits to employees who are injured or become ill as a result of their job, and vehicle insurance, which covers any vehicles used for business purposes.

These are just a few of the many options available. Be sure to discuss your specific needs with an insurance agent.

No matter how safe you try to be, accidents can happen on the job site. That’s why it’s so important to have insurance in place before something goes wrong. By protecting yourself and your business, you can rest assured knowing that you’re covered in case of an accident.

5. Secure the necessary funding for your own construction company

Starting a construction company can be a lucrative endeavor, but it takes some upfront investment to get started and become a successful business. Most construction companies need funding in order to rent or purchase the equipment and supplies necessary to begin work. Our guide on renting or buying construction equipment can help demystify the process.

Once you decide what supplies you need, here are several types of funding available for small businesses:

• Small Business Loans
• Working Capital Loans
• Purchase Order Financing
• Vendor Financing

If you're looking for a loan, it's important to shop around and compare interest rates.

If you don't have the time or resources to apply for a loan, there are other ways to get funding. Some construction companies partner with factoring companies, which buy invoices at a discount in order to provide working capital.

No matter how you secure funding, it's important to have a solid business plan and good credit history. By planning ahead and doing your research, you can set your construction company up for success.

Let's explain those types of funding available for your construction business:

Small Business Loans

Small business loans, such as construction business loans, are a type of loan specifically designed for small businesses. They offer financing at favorable rates, and they can be used for a variety of purposes, including starting a business, expanding operations, and equipment loans.

There are several types available. Some lenders specialize in certain types of loans, such as working capital loans or equipment financing.

If you're thinking about applying for a small business loan, here are some things to keep in mind:

• Have a solid business plan and good credit history
• Compare interest rates and terms from different lenders
• Be prepared to provide detailed information about your company

Working Capital Loans

Working capital loans are a type of loan specifically for small businesses. They're designed to help businesses cover day-to-day expenses, such as inventory, payroll, and accounts receivable.

Working capital loans can be used for a variety of purposes, including expanding your business, buying new equipment, or hiring additional staff. They're typically unsecured loans, meaning you don't need to put up any collateral.

Purchase Order Financing

Purchase order financing is a type of funding that can help small businesses get the supplies they need to start operations.

When a business orders goods or materials from a supplier, the supplier will often require payment before shipping the products. This can be an issue for businesses that don't have cash on hand. Purchase order financing helps by giving businesses the money they need to pay for their supplies, then paying back the lender once the goods have been delivered.

There are several benefits to purchase order financing:

• It can help businesses get started quickly and without having to wait for approval from a bank.
• There are no long-term commitments or penalties for early repayment.
• The interest rates are typically lower than those of credit cards or traditional loans.
• Businesses can use purchase order financing for any type of purchase, including inventory, equipment, and supplies.

Vendor Financing

Vendor financing involves working with suppliers to get extended terms on purchases or paying for supplies in installments. Many suppliers are happy to work with small businesses, and it can be a great way to get started without taking on too much debt.

To qualify for vendor financing, you'll need to have a good credit score and a solid business plan. It's also important to have a relationship with suppliers who are willing to offer this type of financing. By working with your suppliers, you can get the supplies you need to start your construction company without breaking the bank.

6. Hire employees

When starting your own construction company, one of the most important decisions you will make is who to hire.

There are two main types of employees in the construction industry: employees and contractors. Employees usually have an indefinite contract with no end date and might receive benefits like health insurance and paid time off. Contractors, on the other hand, are self-employed. Your company hires them to work on a specific project in exchange for a fixed pay rate.

How do you decide which type of employee to hire? Here are some factors to consider:

• How much experience does the employee have?
• What is the scope of the project?
• How long will the project take?
• What are the qualifications of the employee?
• How much will it cost to hire an employee versus a contractor?

Check labor statistics on specialized websites and find the best workers.

7. Purchase or lease equipment and supplies

You will need to decide whether to purchase or lease equipment, and purchase materials. This is an important decision that can have a significant impact on your business. Here are some factors to consider when making this decision:

• How often will you use the equipment?
• What type of equipment do you need?
• How long do you plan to stay in business?

8. Grow your construction business

Starting a construction company is no easy task. It takes a lot of hard work, dedication, and customer service. Building a strong client base is essential to the success of any construction company. There are a few key things you can do to help grow your business and cultivate customer loyalty.

• Be Honest and Communicative
• Create a Project Timeline
• Offer Excellent Customer Service

Conclusion: Don't go all alone

Starting a construction business can be a daunting task. You’re up against the tough competition, and the cost of entry is high. But with the right planning and execution, you can make your construction business thrive.

One of the most important things to remember is to not go it alone. Join industry associations, network with other contractors, check labor statistics and find a mentor. Having a support system in place will help you stay afloat during tough times.

Another important factor to consider when starting a construction business is financing. You need to have enough money to cover your costs, and you may also need money to keep your business running until it becomes profitable. That’s where Finberg Investment comes in – we offer construction business loans that can help you get your business off the ground. Contact us today to learn more about our loan products and how we can help you build a successful construction business.