How to Start a Construction Business

How to Start a Construction Business

ON THIS PAGE


How to Start a Construction Business

If you’re looking to start a Construction business, you’ve come to the right place. Since we’re going to show you exactly how to do it.

We’ll start with key Construction industry fundamentals like how big the market is, what the key segments are, and how revenues and profits are generated.

Then we’ll discuss keys to not only starting a Construction business, but succeeding in it!

How Big is the Construction Industry?

According to First Research and IBISWorld, the construction industry has grown at a rate of approximately 3.4% over the past five years, to reach $1.5 trillion in revenue. Revenue is generated by the approximately 660,000 construction businesses in the US.

What are the Key Segments of the Construction Industry?

The Construction industry is responsible for a wide variety of activities, from dam and highway construction to roofing and tile work. The top revenue-generating segments include Commercial Building Construction segment. This segment includes construction work (including maintenance and repairs) on office, retail, hotel, agricultural and entertainment buildings.

  • Electricians and Housing Developers tie for second-largest segment.
  • Other segments generating at least $100 billion per year include Municipal Building Construction companies, Plumbers, Home Builders, and Road & Highway Construction.


What External Factors affect the Construction Industry?

A number of factors affect the performance of the Construction industry. These drivers include:

Funding – Federal, State, and Local governments fund a variety of construction projects, namely infrastructure projects and municipal projects. As such, the industry benefits when more government funding is available.

Input Prices – When the price of inputs (such as concrete, steel, and lumber) rises, industry operators will generate lower profit margins. Conversely, low input prices can increase demand for construction, and allow for more profit.

Corporate Profit and Per capita disposable income – The industry relies heavily on corporation’s and individual’s ability to order construction projects. Corporate profit is one of the factors in determining business expansion, which requires new construction. Similarly, homeowner’s access to disposable income spurs demand for new housing or home improvement projects.

Technology – Companies that adopt newer technology have significant market advantage. Some examples of new technology used in the industry include geographical information systems (GIS), Building Information Modeling (BIM) and laser scanning, telematics, and drones.

Future of the Construction Industry: Techniques & Technologies


Who are the Key Competitors in the Construction Industry?

Major construction companies in the US include Fluor, Bechtel, and The Turner Corporation.

What are the Key Customer Segments in the Construction Industry?

The key customer segments in the Construction market are as diverse as the services provided by the industry. These customers can be grouped by Residential Building Construction (which primarily serves individuals and investors), Nonresidential Building Construction (serving corporations, commercial establishments, sports clubs, etc.), NonBuilding Construction (typically infrastructure, funded with public monies; industrial projects; excavation projects, etc.), and Other Construction Companies (for services such as electrical work, flooring, window installation, etc.).

What are the Key Costs in the Construction Industry?

Wages – Wages are a significant expense for construction businesses, averaging approximately 27% of revenue.

Purchases – Purchases, which include tools, equipment, and input materials, are the largest expense for construction companies.

Other – Other costs include rent, utilities, software, subcontractors, insurance, and depreciation.

What are the Keys to Launching a New Construction Business?

  1. Define your vision – Decide which construction segment you will specialize in.
  2. Have a business plan – A business plan will help you set goals and outline how to achieve them.
  3. Get licensed, bonded, and insured – Before you can bid on your first job, you need to investigate and meet the requirements for local and state licenses and do what you need to do to secure them, get your worker’s compensation and liability insurance, and find out how much you need to be bonded for.
  4. Build your team – Hire and train a team of employees that have the right skills. However, since construction is seasonal and cyclical, you must also be willing to downsize if/when the workload decreases.
  5. Take stock of your tools and equipment, and purchase what you need.
  6. Properly price jobs – Be careful to factor in overhead, and actual production costs (materials, labor, inspections, etc.).


Tips to Get Your Construction Business Bonded



10 Tips to Winning Construction Bids


13 Deadly Mistakes of Construction Bidding


What are the Typical Startup Costs for a new Construction Business?

Initial, one-time costs:

  • Tools and equipment
  • Website and promotional materials
  • Office space and equipment

Ongoing costs:

  • Insurance
  • Materials (cement, lumber, steel, etc.)
  • Professional fees (accountant, attorney, etc.)
  • Rent and utilities
  • Equipment maintenance


How much do Construction Operators Make?

Depending on which segment the company specializes in, construction executive salaries average anywhere from $66,000 to $175,920 per year.

Finding and Utilizing Quality Construction Leads


Helpful Videos

Paying Yourself – Owning a Construction Company

Seven Practices to Construction Business Success

Construction Management and Estimating

How To Build A Construction Business



Additional resources in the Construction Industry

For additional information on the Construction market, consider these industry resources:

 

How to Finish Your Construction Business Plan in 1 Day!

Don’t you wish there was a faster, easier way to finish your business plan?

With Growthink’s Ultimate Construction Business Plan Template you can finish your plan in just 8 hours or less!

Click here to finish your business plan today.

 

OR, Let Us Develop Your Plan For You

Since 1999, Growthink’s business plan consulting team has developed business plans for thousands of companies who have gone on to achieve tremendous success.

Click here to see how our professional business plan writers can create your business plan for you

[for="inf_misc_Pleasegiveusabriefoverviewofyourbusinessandorcurrentchallenges"]
[for="inf_misc_Pleasegiveusabriefoverviewofyourbusinessandorcurrentchallenges"]
[for="inf_misc_Pleasegiveusabriefoverviewofyourbusinessandorcurrentchallenges"]
[for="inf_misc_Pleasegiveusabriefoverviewofyourbusinessandorcurrentchallenges"]
[for="inf_misc_Pleasegiveusabriefoverviewofyourbusinessandorcurrentchallenges"]
[for="inf_misc_Pleasegiveusabriefoverviewofyourbusinessandorcurrentchallenges"]