Are you interested in starting a construction business? If YES, here is a complete guide to starting a construction company with NO money and no experience.
Okay, so we have provided you an in-depth sample construction business plan template. We also took it further by analyzing and drafting a sample construction business marketing plan backed up by actionable guerrilla marketing ideas for construction businesses. In this article, we will be considering all the requirements for starting a construction company. So put on your entrepreneurial hat and let’s proceed.
Why Start a Construction Business?
The construction industry can comfortably boast of being responsible for the infrastructural development of the world. The development of any country or city is the handiwork or construction companies and other stake holders. In other words, all the edifices, bridges, dams, roads, estates, campuses, shopping malls, air ports, seaports, office complexes, skyscrapers and massive structures that you see around are all products of the construction industry.
Starting a construction business is capital intensive, simply because of the type of heavy duty equipment that are required to carry out a construction project and also the cost of managing a large workforce. Despite the fact that the construction industry requires huge start – up capital, the industry is highly profitable especially if you have the expertise and capacity to deliver good quality the jobs. The major clients for construction companies are governments and the private sector.
Construction giants all over the world head towards developing countries, because they know that they are going to get juicy construction contracts there. Unlike in advanced economy, in developing countries and undeveloped world, there are loads of construction works to be done. The fact that they have infrastructure deficit means that the government must be up and doing in terms of road constructions, bridge construction, public facility construction (hospitals, schools, office facilities and estates et al) and dams constructions.
After a war, the construction industry is one of the major stakeholders that contribute in the rebuilding of a country. In so doing, they work with governments in ensuring that basic infrastructures are restored and of course it will always result to a win – win situation for both parties. The government gets what they want and the construction company and contractors get good returns for delivering the projects.
Over and above, the success of a construction company to a larger extent depends on their relationship with the biggest clients in the industry; the government of any country. No doubt there is always enough construction contracts to go round as long as a construction company is competent and well positioned, they won’t lack construction contracts from both the government and the private sector.
Starting a Construction Business With No Money or Experience – A Complete Guide
- The Construction Industry Overview
Statisticians and experts in the construction industry suggests that about 40% of construction projects are now fast – track construction unlike what is obtainable before the 21st century. India, the United States, China, Japan, France, Germany and The United Kingdom are some of the countries that have the largest construction output in their economy in 2015.
- Interesting Statistics About the Construction Industry
It is on record that in the United States of America, the construction industry in 2014 generated around $960 billion in annual revenue according to statistics tracked by the Census Bureau. As far back as 2005, there are about 667,000 registered construction firms in the United States and employing 1 million contractors and the average contractor employed by these companies in no fewer than 10 employees.
In general, the construction industry in the United States of America employed an estimated 5.8 million people in April, 2013 and about 828,000 women were employed in the construction industry in 2011. No doubt, the construction industry is a major employer of labor in the United States of America and in most countries of the world.
The construction industry is one industry that is growing despite the fact that the industry has been around right from the early days when people set out to build the tower of Babel. One is certain, the construction industry is an evolving one and new technology and approaches are being employed when it comes to delivering standard and safer construction projects. The industry can’t be said to be oversaturated simply because there are different areas a construction company can specialize in and if you are good with what you do, then you won’t struggle much to continue to attract clients.
The factors and incentives that encourage entrepreneurs to venture into the construction industry are the ability to get good returns on your investment with minimal risks. For example, when you secure a contract to carry out a construction project, the norm is that you will be financially mobilized to start the project. It means that you are not expected to use your money to carry out a construction project.
People also get encouraged to go into start their own construction company because on the average it is cost effective to manage the business / workforce. It is the practice for construction companies to hire experts and casual workers only when they have construction projects to execute. They don’t need to maintain a large workforce.
Starting a Construction Business With No Money – Market Research and Feasibility Studies
- Demographics and Psychographics
The demographic and psychographic composition for the construction industry cuts across governments at all levels and countries, the organized private sector and people of different class and from all walks of life. Below is a list of the people and organizations that need the services of construction companies;
- Organized private sector (Corporate organizations)
- Land Owners
- Businessmen and Businesswomen
- University Campuses
- Foreign investors
- The government at all levels
- Religious Centers
- Sport Organizations
List of Niche ideas Within the Construction Industry You Can Specialize in
Although most standard construction companies in the world are involved in all aspect / area of construction, but that does not mean that there are no area of specialization in the industry. As a matter of fact, if you are just starting your own construction company, it will be to your advantage to choose a niche that you can be known for.
Here are some niche areas that a construction company can be specialized in;
- Road Construction
- Bridge Construction
- Dam construction
- Airports and Helipads Construction
- Seaports Construction
- Skyscrapers construction
- Public facility construction (hospitals, schools, shopping malls, office complexes and industrial facilities et al)
- Construction of residential facilities/ estates
- Property Makeover Services
- Construction Consultancy and Advisory Services
The Level of Competition in the Construction Industry
Surviving in the business world as a construction company requires more than knowing how to deliver standard projects but also how to network with key people that matters; decision makers that can decide who a project is giving to and all that.
No doubt there are loads of big time investors that have stake in the construction industry, but one thing is certain, there is room big enough to accommodate both the big construction companies and the small construction companies. What smaller construction companies need to do to survive in the industry is to concentrate on developing estates, schools, hospitals and hotels et al before bidding for big construction contracts like road construction, bridge construction, dam construction and skyscrapers et al.
List of Well – Known Brands in the Construction Industry
These are some of the leading construction companies in the world;
- Julius Berger
- Laing O’Rourke (UK)
- Royal BAM Group (Holland)
- Kiewit (US)
- Bouygues Construction (France)
- Balfour Beatty (UK)
- Skanska (Sweden)
- Hochtief (German)
- Bechtel (US)
- Grupo ACS (Spanish)
- Vici (French)
- Arab Contractors
Starting a construction company is not like starting a mom and pop business in a street corner in down town LA; it is indeed a serious business hence critical economic analysis must be conducted to ensure that the risks and other threats associated with starting a business or investing in a business a mitigated.
If you are considering starting a construction company, you concern should not be restricted to acquiring an office facility and equipping the facility or hiring the best hands in the industry, you should also be concerned on how to attract investors who can pull the needed cash to successfully execute projects, and also how to give shareholders / partners good returns for their monies.
Lastly, it is important to mention that heavy duty construction equipment and machines can be expensive and one good thing about construction equipment and machines is that it can be rented. But you must ensure that you have done you detailed economic analysis so as know whether renting or out rightly purchasing your own construction equipment and machines will benefit you in the short run or in the long run.
Is the Construction Business Worth Starting from Scratch or is Buying a Franchise Better?
Although there are possibilities of buying a franchise from a construction company or even partnering with a construction giant if you are considering investing in the construction company.
One thing is certain, people are motivated to start business based on various factors and incentives. If you are looking towards building a business that to a larger extent you will be in control of the business, then starting from the scratch should be your best bet. But if you only interested in making money and multiplying your wealth, then you may as well buy the franchise of a successful construction company that is willing to sell its franchise.
Possible Threats and Challenges You Will Face When Starting a Construction Business
Generally in the construction industry, both the already established construction companies and start – up construction companies are subject to threat from government policies, global economic downturn and unforeseen natural disasters (disasters that may cause setback).
Another threat that you are likely going to face when you start your own construction company is the arrival of a big construction company in the location where your business has strong presence.
Starting a Construction Business With No Money – Legal Matters
- Best legal entity to use for a construction business
Starting a construction company is indeed a serious business so the legal entity you choose will go a long way to determine how big you want the business to grow. No doubt choosing a legal entity for a business such as a construction company is some worth straightforward especially if you decided to grow the business big.
When it comes to choosing a legal entity for your construction company you have the option of choosing from a general partnership, a limited partnership, an LLC, a “C” corporation, or a “S” corporation. It is important to clearly state that these different forms of legal structure for business has its own advantages and disadvantages; which is why you must weigh your options properly before making your choice on the legal structure to build your construction company on.
These are some of the factors you should consider before choosing a legal entity for your construction company; limitation of personal liability, ease of transferability, admission of new owners and investors’ expectation and tax issues. If you take your time to critically study the various legal entities to use for your construction company, then you will agree that limited liability company; an LLC is most suitable. You can start your bank as limited liability company (LLC) and in future convert it to a ‘C’ corporation or a ‘S’ corporations especially when you have the plans of going public.
Upgrading to a ‘C’ corporation or ‘S’ corporation will give you the opportunity to grow your construction company so as to compete with major players in the industry; you will be able to generate capital from venture capital firms, stock market, you will enjoy separate tax structure, and you can easily transfer ownership of the company; you will enjoy flexibility in ownership and in your management structures.
Catchy Business Name ideas Suitable for a Construction Business
When it comes to choosing a name for your construction company, there are no hard and fast rules to follow. This is so because construction companies are not like other business who hopes that their names can help them attract passersby who may just walk in to want to do business with them
Here are some catchy business name ideas you can choose for your construction company;
- Shannon Berg Construction Company
- Kings Contractors
- ITW Group
- Jews Contractors
- Dell Civil Engineering PLC
- Daniel and Davidson Group
The Best Insurance Needed for a Construction Company
In the United States and of course in most countries of the world, you can’t operate a business without having some of the basic insurance policies that is required by the industry you want to operate from. Besides, the nature of the construction industry requires that you have the proper insurance cover in place or else you will be forced out of business if any of your projects fails / collapse. So it is important to create a budget for insurance and perhaps consult an insurance broker to guide you in choosing the best insurance policies for your construction company.
Here are some of the basic insurance covers that you should consider purchasing if you want to start your own construction company in the United States of America;
- General insurance
- Health insurance
- Risk Insurance
- Payment protection insurance
- Liability insurance
- Workers compensation
- Overhead expense disability insurance
- Business owner’s policy group insurance
Is Intellectual Property Protection Needed for a Construction Company?
The nature of the construction industry does not in any way warrant that you should file – in for intellectual property protection when you want to start your own construction company; it is not mandatory.
However, the only reason why you would want to secure an intellectual property protection might be to protect some of your company’s high profile documents and perhaps your company’s logo. Other than that, you can successfully run a construction company without an intellectual property protection.
Is Professional Certification Needed to Start a Construction Company?
The construction industry is one of the industries that are highly regulated so as to prevent failed construction projects. For example, the damages caused by collapsed bridges or collapsed stadium is not one that can be imagined hence the need for key construction workers to acquire some certification that will indicate that they are truly tested and trusted.
Here are some professional certifications that you or your key staff must acquire;
- Certified Construction Manager (CCM)
- Gold Seal Certification
- National Association of Safety Professionals certifications
- The Certified Construction Industry Financial Professional (CCIFP)
List of Legal Documents You Need to Run a Construction Company
In The United States of America and of course all over the world, the construction industry is amongst the industries that are highly regulated so as to avoid failed construction projects. If you are considering starting a construction company, then you are expected to meet the legal documents requirements as stipulated in the constitution of your country.
These are some of the basic legal document that you are expected to have in place if you want to start a construction company in the United States of America;
- Certificate of Incorporation
- Business License
- Business Plan
- Non – disclosure Agreement
- Memorandum of Understanding (MoU)
- Employment Agreement (offer letters)
- Operating Agreement
- Company Bylaws
- Operating Agreement for LLCs
- Insurance Policy
Writing a Business Plan for a Construction Company
If you are looking towards starting a construction company, then one of the first steps that you are expected to take is to consult experts to help you write a good and workable business plan. The truth is that, in order to successfully run a construction company, you would need to have a good business plan in place.
A Business plan is the blue print that is needed to successfully run a business; with a workable business plan in place, you will reduce the trial and error approach of doing business. You will be able to manage your business with purpose and perhaps precision; you will know what to do per time and how to handle challenges and growth.
So if you want to start your own construction company, you are required to write a detailed construction business plan that can pass reality test when subjected to it; you should work with the facts, figures and other indices in the construction industry as it applies to the country you intend starting the business.
The whole idea of writing a business plan is not just for the sake of having a business document in place; but a detail guide on how to effectively run your business from the scratch. Your business plan should outline and cover strategies on how you intend to manage and grow your construction company.
The rule of thumb in writing a business plan is to try as much as possible to be realistic and never to over project when putting figures on income and profits et al. As a matter of fact, it is safer to underestimate when writing a business plan so that you won’t be so disappointed when reality sets in.
These are the key areas that should be covered in your business plan;
- Executive summary and Company’s descriptions: you are expected to write about the concept of your business, descriptions of your company, your company’s vision statement, mission statement and where your company will be located and also if you intend selling out franchise or opening outlets in different cities in the United States of America and in other parts of the world.
- Other key components that should not be missing in your business plan are product offering, SWOT analysis, competitive analysis, marketing and sales analysis / strategies, target market, market goals, pricing, costing and financial projection, publicity and advertising strategy, expansion and growth strategies, budget and start – up capital generation et al.
Detailed Cost Analysis of Starting a Construction Company
There are several expenses that you would have to make before successfully launching your own construction company. It is important to state that the location you choose to launch your business will definitely impact on the overall cost of starting the business which is why it is very important to have concluded and analyzed your feasibility studies and market survey before drawing up a budget and sourcing for funding for your business.
Here are some of the basic costs you must look towards fulfilling when starting a construction company in the United States of America;
- The Total Fee for incorporating the Business in United States of America – $750.
- The budget for Insurance, permits and license – $10,000
- The Amount needed to acquire a suitable Facility with enough space in the United States of America (Re – Construction of the facility inclusive) – $500,000.
- The Cost for equipping the office (computers, printers, fax machines, furniture, telephones, filing cabins, safety gadgets and electronics et al) – $15,000
- The cost for acquiring heavy duty construction equipment – $2,000,000
- The Cost of Launching a Website – $700
- Additional Expenditure (Business cards, Signage, Adverts and Promotions et al) – $5,000
- Working capital (investment fund) – $3,000,000 (3 Million US Dollar)
Going by the report from our research and feasibility studies, we will need about $7,000,000 (7 US Million Dollars) to set up a medium scale construction company in the United States of America.
On the average, you would need a about 1 million US dollars to start a small call construction company especially if you will be leasing most of your construction equipment and machines. If you choose to start a large scale construction company, then you should look towards budgeting about 10 million US dollars and above. This money include paying experts that will be on your employee / payroll.
- Financing Your Construction Company
If you choose to start your construction company on a small scale, you might not need loads of money to launch the business, but if you decide to start on a large scale, you will sure need to raise the required start – up capital to launch the business.
If you are starting your construction company on a large scale, you will need a decent office space, office equipment and furniture, and money budgeted for the payment of salaries and utility bills for at least a period of 3 months and you will also need loads of money to purchase standard construction equipment and machines. In essence you are expected to generate your start – up capital.
When it comes to financing a business, one of the first thing and perhaps the major factors that you should consider is to write a good business plan. If you have a good and workable business plan in place, you may not have to labor yourself before convincing your bank, investors and your friends to invest in your business.
Here are some of the options you can explore when sourcing for start – up capital for your construction company;
- Raising money from personal savings and sale of personal stocks and properties
- Raising money from investors and business partners
- Applying for loan from your bank / banks
- Pitching your business idea and applying for business grants and seed funding from donor organizations and angel investors
- Source for soft loans from your family members and your friends.
Choosing a Location for Your Construction Company
Choosing a location for your business is not what you should do without due consultation. The truth is that, if you get it wrong with the location you decided to pitch your business, you are more likely going to struggle to make headway with the business. One of the major reasons why business struggles, fails and eventual close shop; is the fact that the owners decided to choose a wrong location for the business.
Although if you are able to build a successful construction company brand, you can pitch your business in any part of the world and still make success out of the business. But if you are just starting out; especially if you are a newbie in the construction industry, it is important that you locate your business in an area that loads of construction jobs are still going. It is will perhaps help you cut cost of advertisement and promotion. If you decide to pitch your tent in a busy business district in a major city, then you should be ready to do loads of networking, advertisement and marketing.
Starting a Construction Business – Technical & Manpower Details
If you decide to start a standard construction company, then you should be ready to purchase some of the heavy duty equipment and machines needed in the construction field. You would need to purchase concrete mixers, block molding machines, grading machines, gathers, cranes, forklifts and loads of other construction machines.
So also you should ensure that you have the required software applications in place. You would need engineering / civil engineering software applications such as Computer Aided Design Software Application (CAD), Auto Cad, and other related software applications (payroll software, accounting software, CRM software et al).
When it comes to manpower, of course you are not expected to kick – start a construction company without having some key roles being occupied by trained and qualified personnel. Ideally if you are looking towards starting a standard construction company, then you should make provision for the following roles in your organization;
- Chief Executive Officer (President)
- Project Manager, Civil Engineer
- Structural Engineer
- Quantity Surveyor
- Land Surveyor
- Company’s Lawyer / Secretary
- Admin and HR Manager
- Business Developer
- Front Desk Officer
It is the practice for construction companies to hire contract staff as laborers in construction sites.
When it comes to choosing between renting or leasing a facility for your office, then you should be guided by your business plan and long term and short term business goals. If you have enough cash, then you should consider leasing a facility but if not, renting a facility is not a bad deal to start your construction company.
On the average, you would need an estimate of about a dozen full time employees to start a construction company not ignoring the fact that you should make provision for casual workers.
The Production Process Involved in the Construction Industry
Usually, the process involved in the construction industry starts with sealing a construction contract; signing the required legal documents. Once the contract documents has been signed and contract / project mobilization fee has being paid, then all the experts / engineers will move into full swing action to get the construction job / project delivered as agreed.
If you want to ensure that you start and complete a construction job within the stipulated time, then you must work towards perfecting plans to get the supply of all you would need to get the job done as at when due. Mind you, you would need sand, rods, cements, blocks, and other building materials.
Starting a Construction Business – The Marketing Plan
- Marketing Ideas and Strategies for a Construction Business
Construction company is not a business that you have to retail products which is why you must do all you can to maximize any opportunity that comes your way because in the construction industry, your previous work is your major marketing tool.
So when you are drafting your construction company marketing ideas and strategies for your construction company, make sure that you create a compelling personal and company’s profile which must include the profile of your board of directors and management team. The truth is that if you have highly qualified, trustworthy and successful professional in your board and core management team, with that you can have leverage in the market place.
Here are some of the platforms you can utilize to market your construction company;
- Advertise your business in relevant business magazines and make yourself available for construction related talk shows and interactive sessions on TV and Radios)
- List your business on local directories / yellow pages (both online and offline)
- Attend expos, seminars, and business fairs et al
- Leverage on the internet to promote your business
- Join local chambers of commerce around you with the main aim of networking and marketing your construction company.
- Introduce our business by sending introductory letters alongside our brochure to all the corporate organizations and government offices in your target area.
- Promptness in bidding for contracts
- Create different packages for different category of clients in order to work with their budgets and still deliver quality housing/ property to them
Possible Competitive Strategies for Winning your Competitors in the Construction Industry
It might be challenging competing as a newbie in the construction industry especially in a highly organized market like that of the United States of America, which is why you must be deliberate in choosing your board members and your core management team.
As a construction company, if you are known to deliver standard and world class edifice, then you are not going to struggle to compete in the industry. The truth is that your major marketing tool as a construction company is to projects that you have executed in time past; your completed project should speak for you.
So ensure that you put in your best whenever you have the opportunity to handle any project. You should be known for delivering world class structures. Creativity, excellence and timely completion of construction projects should be our signature.
Lastly, handling a wide range of construction jobs; jobs ranging from the construction of estates and skyscrapers to the construction of bridges and airports et al. will count as a competitive advantage for your company.
Possible Ways to Increase Customer Retention for a Construction Business
The construction industry is one where you are expected to meet the laid down standard in any construction job that you handle, hence the least you can do is to meet up with the industry standards. So as a construction company, you should do all that lies within your power to retain your clients especially when you are able to secure big – time clients like the government.
The truth is that, if a company is able to achieve over 60 percent retention the company will sure experience huge turn over and such company can comfortably be classified as a healthy company. You just have to perfect your plans on how to improve your customer experience from time to time so as to retain them and continue to get construction contracts from them or to get referrals from them.
Over and above if you want to increase customer retention for your construction company, then you must ensures that you deliver standard construction projects toy our clients, you must ensure that you get feedbacks from your customers at all times and ensure that you work within the stated budget of your clients and also to deliver all projects within the agreed timeline.
Strategies to Boost your Construction Brand Awareness and Create a Corporate identity
When it comes to creating brand identity for a construction business, your construction projects should be your number one brand ambassador, which is why we must ensure that we deliver world class projects at all times. Ensure that you work with your consultants to help you map out publicity and advertising strategies that will help you walk your way into the heart of your target market.
First and foremost, you should ensure that your brand is visible and well communicated which is why you should make provisions to work with different class of people in the society. All your publicity materials and jingles should be done by some of the best hands in the industry.
Below are the platforms you should leverage on to boost your brand awareness and create a corporate identity for your construction company;
- Introduce your business by sending introductory letters alongside our brochure to all the corporate organizations and government offices in within your target area
- Advertise your business in real estate / properties magazines and websites
- List your business on local directories / yellow pages (both online and offline)
- Promote our business on satellite TV stations and radio stations.
- Attend related expos, seminars, and business fairs et al
- Engage in direct email marketing
- Leverage on the internet (social media platforms and your official websites) to promote your business
- Ensures that your workers wear your branded shirts at all times during working hours and also make sure you brand all your company’s official vans, trucks and cars et al.
Creating a Suppliers/Distribution Network for your Construction Company
If you run a construction company, then it will be to your advantage to network and secure the services of major suppliers of building material within the area you operate. You don’t have to go to the market to start purchasing building materials whenever you about to commence the construction of a project, all you need to do is to make one or two calls and you will get the building materials supplied to the construction sites.
You are not going to achieve this overnight; you are expected to network and build business relationship with stake holders in the value chain of the construction industry. The truth is that you stand the chance of getting cheaper supply of building materials if you are able to build robust relationships with suppliers.
Tips for Running a Construction Business Successfully
The truth is that, irrespective of the kind of business you run, your ability to get all the members of your team on same page at all times is one of the keys you need to successfully run the organization.
As the chief executive officer or president of a construction company, it is you responsibility to give direction to the business. Part of what you need to do is to ensure that you create time for office meetings; a time where challenges, feedbacks, projections and relevant issues are discussed. The meetings could be daily, once in a week, twice a week or once in a month. The bottom line is that there should be consistent meetings in your organization.
Carrying out appraisals on a regular basis and training your employees will help you run your organization effectively. Encourage your employees to pursue certifications in their various area of specializations; it will help your organization’s profile and of course it will help the individuals. You can choose to fully or partially sponsor some of the certifications.
Lastly, you should keep your doors open for suggestions from members of your team and your clients. It is very important to reward excellent performance in your organization; it will go a long way to encourage healthy competition in your organization.