7 Steps on How to Start a Construction Company

7 Steps on How to Start a Construction Company
7 Steps on How to Start a Construction Company
Author: Small Business Expert | June 30, 2023 | Topic: Used Equipment

7 Steps on How to Start a Construction Company

Working in construction allows professionals to secure steady work, competitive pay and a work environment outside traditional office space. Construction work is also always in demand, and owning a construction business gives you control over your schedule and lets you contribute to the job market.

If you have skills in construction work and construction specializations, you may have considered creating your own construction business. Below, you'll learn more about how to start a construction company and create a construction business model to help you get off the ground and be successful.

Benefits of Starting a Construction Company

Starting a construction company has many benefits, including being your own boss and working outdoors. Some of the other advantages include the following:

  • Growing industry: Construction is consistently growing due to aging buildings and an increasing population. Construction is expected to grow from new projects and renovating old buildings, giving new business owners plenty of opportunities in most locations. Clients can also search for contractors online, making it easy to grow, even when starting.
  • Specialization opportunities: New business owners can specialize in specific subsections of the construction industry to gain a competitive edge against the competition. Specialization opportunities allow companies to streamline their production so workers can become more familiar and knowledgeable about the processes, helping improve safety and efficiency.
  • Community impact: New construction companies can make a positive impact on their local community, building homes for families or civic structures, such as libraries, schools or hospitals.
  • Starting small: New construction businesses don't need a large worker base or equipment fleet to get started. You can start with just a few employees and purchase used equipment to help keep costs low. You can also hire more temporary workers when you have bigger projects or rent equipment for specific jobs to help save on costs when you're starting.

7 Steps to Start a Construction Company

You likely have many construction skills if you're interested in starting a construction company. However, you may not know the steps to start a construction business or how to run one. Learn how to start a construction business and be successful by following these steps.


1. Research the Industry and Your Local Market

The first step of starting a construction company is researching the industry. The internet is full of free information you can use when doing market research, including the following:

  • The U.S. Small Business Administration (SBA): The SBA has many tools for small businesses, and you can find some specific to the construction industry.
  • U.S Bureau of Labor Statistics (BLS): The BLS collects data about employment in various industries, including construction. The BLS collects job data, including earnings, job openings, hours and hires.
  • Construction industry publications: Different organizations and publishers have statistics specific to construction that can help provide valuable insight into the industry, including the Construction Marketing Association and the Fails Management Institute.
  • Local industry publications: Construction statistics often vary based on geography, so you'll want to look up organizations and publications in your area, allowing you to gain additional insight into your local market.
Research the Industry and Your Local Market


Once you've collected industry information, you'll also want to research the viability of construction companies in your local market. In many places, the construction market is oversaturated, and it can be challenging for a new company to get a foothold.

You'll want to start by looking at how many construction companies are operating in your area, their reputations and how much they charge for their services. Develop an understanding of your potential customer base, including how many are in the area, their social status, age and interests. You can find much of this information in the publications we mentioned above. Knowing this information can help you develop a better business plan and give you a competitive edge when you start taking on clients.

You can also talk directly to your customer base to do your own market research in your local area. You can use surveys, interviews, focus groups and questionnaires to gather your information. You'll want to determine how often clients hire contractors, what they look for when hiring and their biggest issues with their other contractors.


2. Write a Construction Business Plan

Once you've completed your market research, you can draw up a business plan. A business plan helps guide you through building a company while making getting approved for loans and raising investment funds easier. A typical business plan will include the following:

  • The construction services you'll provide
  • How you'll manage your business
  • The types of jobs you'll bid on
  • Your target market
  • Your marketing plan
  • The startup costs
  • Your projected earnings for the first year
  • The number of employees you'll have

Creating a business plan can seem daunting if you've never done it before. The good news is that there's always help available. You can hire someone to help you draft a business plan or look for programs you can contact for guidance. You might also look for specific organizations to help new businesses get off the ground.


3. Register Your Construction Business

Once you've finalized your business plan, the next step is to register your new construction business to make it a legal entity. Registering your company can provide legal and tax benefits and personal liability protection, depending on your business structure.

Register Your Construction Business


Registering your business is simpler than you may think. You can contact your state and local government to register your new business. However, remember that not all states will provide the registration automatically. As a result, you should register your business federally to get your federal tax ID or Employer Identification Number (EID). Registering your business federally allows you to trademark your logo and business name.


4. Set up Licenses, Permits, Certifications and Insurance

Once you've registered your business, setting up your license, permits, certifications and insurance is essential. First, construction companies must get state and federal licenses and permits. The requirements vary per state, but a construction company generally needs the following licenses to operate:

  • General contractor's license: Most states require construction companies and workers to have a general contractor's license to work in the state. These licenses prove that the company and its workers have the necessary competency to complete construction projects and ensure that contractors can get the required work done for their clients.
  • Specialty contractor's license: Depending on the state, you may need more in-depth licenses. Contractors who work in a specialized field may need to get a specific license for their industry. For example, contractors specializing in HVAC, painting, roofing or electrical services will likely need a license to demonstrate their competency in their field.

If you want to bid on government contracts, you must also register as a government contractor.

Another requirement for construction companies is insurance coverage to ensure they can operate in a specific state. Insurance will vary based on location, but your construction company should consider getting these six types of insurance:

  • Property insurance: If your business has a physical location, you'll want to get insurance to cover your property in case you experience a natural disaster, theft or other damage. Property insurance can also offer you coverage if a client is injured on the property.
  • General liability insurance: This type of insurance will cover incidents such as injuries, property damage, and work site accidents.
  • Workers' compensation insurance: If an employee is injured on the job, general liability insurance will likely cover the immediate results of the accident. However, if the injury results in a long-term injury or lost wages, you'll need workers' compensation insurance to cover employee benefits while they're recovering from their injury.
  • Vehicle insurance: All construction companies need at least a few pieces of heavy equipment to complete their work. If you own construction equipment, you'll want to ensure your equipment is insured. If you decide to rent, you can provide your own insurance or purchase a waiver to reduce your liability.
  • Unemployment insurance: If one of your employees loses their job for reasons out of their control, such as company closure or layoffs, unemployment insurance helps ensure your workers are financially covered until they find a new job.
  • Disability insurance: If a worker develops a long-term disability that prevents them from working, disability insurance allows them to file a claim for financial assistance.

Insurance is essential to protect your business and workers and is required to operate a business in most states, especially in construction. Once you've set up your insurance and gotten all the licenses, permits and certifications necessary to operate your construction business, you can move on to the next step.


5. Acquire Funds

Unless you have the capital to fund your business, you'll likely need to find funding to get your business started. Running a company can be expensive. As a business owner, you'll need funds to pay for everything from insurance and supplies to operations and payroll. You can fund your construction company in a few different ways, including the following:

  • Small business loans
  • Vendor financing
  • Equipment loans
  • Working capital loans
  • Purchase order financing

You should also open a business bank account, which is essential before you start accepting your first bids from clients. Keeping your business and personal finances separate helps protect you against liability and is often required when you register your legal entity. A business bank account also allows you to accept payments under your business name, protect your personal assets and establish credit.

Acquire Funds


6. Develop and Define Your Brand

A strong brand image helps you distinguish your business from others. Your brand also represents your business goals, values and standards.

After you've come up with a name for your business, the first step in developing your brand is to create a logo, which is essential for marketing and advertising. Your logo is often the first impression clients have of your business. Your logo should clearly represent your business and make you easily identifiable to potential clients.

Once you've developed your logo, you'll want to find additional ways to get your brand name out there so you can start drawing in clients. Some methods to increase brand awareness include:

  • Promotional products
  • Business cards
  • Email marketing
  • Networking

Regardless of your chosen method, you should ensure your marketing campaigns hold true to your brand goals, values and standards.


7. Establish Your Web Presence

The final step in this guide to starting a construction company is establishing your web presence. The internet is one of the best ways to market your business and garner more interest in your services. Your website should be one of the first things you focus on to develop your presence and help clients find your services. You can also use your website to gather client information and share your business's services.

You can make a website in many ways. You can hire a designer or a freelancer or create your site yourself, even if you don't have any previous experience. Many website-building tools include everything you need to build a website, and you won't have to code anything. However, you may want to consider working with web design experts if you rely on your website for your services.

Additionally, you'll want to consider establishing a social media presence. Many people use social media to find new businesses to work with, and using social media can help you reach a wider audience. You can also easily update potential clients about new services or changes to your business.

Why Purchase Used Equipment for Your New Construction Company?

Creating a new construction company comes with many upfront costs, especially regarding heavy equipment. Equipment can be one of the most significant expenses for a new construction company. Buying used equipment allows you to get the same quality without spending as much, which is ideal when you're starting out and have less capital than an established business. Some of the other benefits of buying used heavy equipment include the following:

  • Less depreciation: On top of saving on the initial cost of the equipment, buying used also results in slower depreciation than buying new. New equipment depreciates quickly after the purchase, significantly impacting a new company. Buying used equipment helps slow the depreciation rate, especially if you maintain your equipment.
  • Better selection: Generally, there's more used equipment available on the market than new. When you buy new, you're limited to the recently released equipment. Buying used allows you to access a broader market, and much of the used equipment available can perform many of the same functions as new equipment but at a lower cost.
  • Lower insurance: Insurance costs for used equipment are significantly less than new equipment, which can help new construction companies save on expenses.
  • Consistent resale value: Since used equipment doesn't depreciate at the same rate as new equipment, used equipment often maintains its resale value, which benefits new businesses looking for ways to save and get a return on their investment.
Why Purchase Used Equipment for Your New Construction Company?

Support Your New Company With Used Equipment From Cat Used

Heavy equipment is essential to construction work, but buying new equipment can be challenging for new businesses. Rather than using limited business funds to purchase new equipment, you can search for used equipment on Cat Used. Used equipment offers many benefits for construction companies, including reducing costs and offering high-quality equipment that performs just as well as new equipment.

You can browse our dealer inventory of used construction equipment online or find a dealer near you to talk to a representative in person. You can also sign up for email alerts to get notified when the equipment you're interested in becomes available.

Support Your New Company With Used Equipment From Cat Used

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Support Your New Company With Used Equipment From Cat Used
Support Your New Company With Used Equipment From Cat Used