It can be quite difficult to come up with the precise amount it will cost to start a construction company in the United States. Nevertheless, according to industry reports, small construction companies will need around $50,000 as startup costs, while larger companies will have to look towards $500,000.
Venturing into the construction industry is indeed a daunting process that requires substantial capital. Note that the ever-growing building sector is projected to attain a value of $15.5 trillion by 2030, an increment of more than 30% from current.
Although there are vast opportunities for success, the potential for costs and challenges will have to be considered extensively to ensure you can efficiently start your business and attain success.
Starting a construction business in the United States is a very expensive endeavor, and it’s vital for prospective business owners to understand the cost structure of the construction industry. Startup costs of a construction company can range from $50,000 – $500,000. It should be noted that a good portion of the costs incurred when starting a construction company are reoccurring.
Factors That Determine the Cost of Opening a Construction Business
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Licenses and Permits
You can’t start a construction company in the United States without the necessary licenses or permits. Owing to that, it is recommended you check with the contractor’s licensing division or board in your location to find out all you can regarding the requirements and costs especially since most states expect contractors to be licensed.
You will also need to put in place the business entity, obtain a state business license, and in some places get business licenses in the cities where your projects are located. You might be mandated to pay your state’s Corporation Division or Secretary of State to register your business name. Nevertheless, expect to pay anywhere around $100 and $1,000 on licenses and permits.
Building and Premises
When looking to start a construction company, note that the money you invest into purchasing or leasing buildings and premises will be one of your largest expenses. In the United States, reports have it that the total cost of property rental ranges from $643,400 for the lowest quartile to $2 million for the highest quartile.
This is without doubt a very dominant investment to make especially at the very beginning of a business, as such you should plan very carefully.
When starting a construction company, it’s very necessary you consider these expenses. In most places in the United States, contractors are required to have employer’s liability insurance, public liability insurance, and in some cases, professional indemnity insurance.
General liability insurance can cost around $3,000 per year, but the exact cost of your insurance will vary depending on the level of coverage needed.
It is very necessary to understand the amount you have to invest in the machinery and equipment you need to run a construction company. Have it in mind that the cost of construction machines and equipment can vary extensively, and will most often depend on the type of project and the equipment required.
Purchasing good quality construction equipment and machinery is very necessary if you want to remain successful in this line of business.
A good, functional commercial fleet is very important to the success of your business, as it makes it possible to move goods, services, personnel, and more.
Ideally, the amount you pay to purchase vehicles for your fleet will vary massively depending on the makes and models you get, along with how new or pre-owned the vehicles are. In the United States, a new, small commercial truck or van will warrant around $27,000 – $80,000 USD, while a large commercial truck may cost around $140,000 USD.
Aside from that, there are other necessary costs that the business owners will need to factor into their budgets. These may include:
- Equipment/tools necessary for your vehicles
- Fuel costs
- Insurance and registration fees
- Toll charges
- Parking fees
- Storage costs
Marketing & Advertising
Marketing and advertising is a very vital part of establishing a construction company. It is how you ensure that your company’s name is out there for clients to see and that you can inculcate trust in their minds.
With the appropriate marketing and advertising strategy, it is possible to target the right demographic and let them see the unique qualities of your business. The amount you invest in marketing and advertising will most often depend on the type of strategy you intend to implement and the size of the construction business.
Salaries and wages
This is another factor that will determine your startup cost when opening a construction company. It is very necessary to take into consideration the wages for key employees (i.e. engineers, designers, supervisors) in addition to general labor when making plans for a new construction company.
However, note that wages and salaries will vary and depend on the location of your construction company in the United States coupled with the sort of construction work being carried out by the company.
You have to invest in multiple pieces of office equipment and supplies such as a computer, phone, and furnishings to set up your office. The cost of these will vary depending on what you decide to obtain and where you buy them from. To open a construction company, below are valid equipment to note;
- Internet Service Provider
- Filing cabinets
- Paper Trays, Binders and Folders
- Office chairs and Tables
- Phones and Answering machines
- Signage for your doorstep
- Copier and scanner
- Desk Lamp, Rugs and Plants
It takes a whole lot to start and manage a construction company in the United States. From construction equipment and machinery, buildings, vehicle fleet, licenses, insurance, marketing and advertising, salaries and wages, and office supplies and equipment, you have to anticipate investing around $50,000 to $400,000 to start this business.
Nevertheless, it is possible to make money in this line of business if choose the appropriate contractors and suppliers, put together a detailed business plan, and institute the right marketing strategies.