Starting an excavation company can be very profitable. With proper planning, execution and hard work, you can enjoy great success. Below you will learn the keys to launching a successful excavation company.
Importantly, a critical step in starting an excavation company is to complete your business plan. To help you out, you should download Growthink’s Ultimate Business Plan Template here.
14 Steps To Start an Excavation Company:
- Choose the Name for Your Excavation Company
- Develop Your Excavation Company Plan
- Choose the Legal Structure for Your Excavation Company
- Secure Startup Funding for Your Excavation Company (If Needed)
- Secure a Location for Your Business
- Register Your Excavation Company with the IRS
- Open a Business Bank Account
- Get a Business Credit Card
- Get the Required Business Licenses and Permits
- Get Business Insurance for Your Excavation Company
- Buy or Lease the Right Excavation Company Equipment
- Develop Your Excavation Company Marketing Materials
- Purchase and Setup the Software Needed to Run Your Excavation Company
- Open for Business
1. Choose the Name for Your Excavation Company
The first step to starting an excavation company is to choose your business’ name.
This is a very important choice since your company name is your brand and will last for the lifetime of your business. Ideally you choose a name that is meaningful and memorable. Here are some tips for choosing a name for your excavating business:
- Make sure the name is available. Check your desired name against trademark databases and your state’s list of registered business names to see if it’s available. Also check to see if a suitable domain name is available.
- Keep it simple. The best names are usually ones that are easy to remember, pronounce and spell.
- Think about marketing. Come up with a name that reflects the desired brand and/or focus of your excavation company.
2. Develop Your Excavation Company Plan
One of the most important steps in starting an excavation company is to develop your excavation business plan. The process of creating your plan ensures that you fully understand your market and your business strategy. The plan also provides you with a roadmap to follow and if needed, to present to funding sources to raise capital for your business.
Your business plan should include the following sections:
- Executive Summary – this section should summarize your entire business plan so readers can quickly understand the key details of your excavation business.
- Company Overview – this section tells the reader about the history of your excavation company and what type of excavation company you operate. For example, are you a demolition, utility, or a general excavation company?
- Industry Analysis – here you will document key information about the excavation industry. Conduct market research and document how big the industry is and what trends are affecting it.
- Customer Analysis – in this section, you will document who your ideal or target customers are and their demographics. For example, how old are they? Where do they live? What do they find important when purchasing services like the ones you will offer?
- Competitive Analysis – here you will document the key direct and indirect competitors you will face and how you will build competitive advantage.
- Marketing Plan – your marketing plan should address the 4Ps: Product, Price, Promotions and Place.
- Product: Determine and document what products/services you will offer
- Prices: Document the prices of your products/services
- Place: Where will your business be located and how will that location help you increase sales?
- Promotions: What promotional methods will you use to attract customers to your excavation company? For example, you might decide to use pay-per-click advertising, public relations, search engine optimization and/or social media marketing.
- Operations Plan – here you will determine the key processes you will need to run your day-to-day operations. You will also determine your staffing needs. Finally, in this section of your plan, you will create a projected growth timeline showing the milestones you hope to achieve in the coming years.
- Management Team – this section details the background of your company’s management team.
- Financial Plan – finally, the financial plan answers questions including the following:
- What startup costs will you incur?
- How will your excavation company make money?
- What are your projected sales and expenses for the next five years?
- Do you need to raise funding to launch your business?
3. Choose the Legal Structure for Your Excavation Company
Next you need to choose a legal structure for your excavation company and register it and your business name with the Secretary of State in each state where you operate your business.
Below are the five most common legal structures:
1) Sole proprietorship
A sole proprietorship is a business entity in which the owner of the excavation company and the business are the same legal person. The owner of a sole proprietorship is responsible for all debts and obligations of the business. There are no formalities required to establish a sole proprietorship, and it is easy to set up and operate. The main advantage of a sole proprietorship is that it is simple and inexpensive to establish. The main disadvantage is that the owner is liable for all debts and obligations of the business.
2) Partnerships
A partnership is a legal structure that is popular among small businesses. It is an agreement between two or more people who want to start an excavation company together. The partners share in the profits and losses of the business.
The advantages of a partnership are that it is easy to set up, and the partners share in the profits and losses of the business. The disadvantages of a partnership are that the partners are jointly liable for the debts of the business, and disagreements between partners can be difficult to resolve.
3) Limited Liability Company (LLC)
A limited liability company, or LLC, is a type of business entity that provides limited liability to its owners. This means that the owners of an LLC are not personally responsible for the debts and liabilities of the business. The advantages of an LLC for an excavation company include flexibility in management, pass-through taxation (avoids double taxation as explained below), and limited personal liability. The disadvantages of an LLC include lack of availability in some states and self-employment taxes.
4) C Corporation
A C Corporation is a business entity that is separate from its owners. It has its own tax ID and can have shareholders. The main advantage of a C Corporation for an excavation company is that it offers limited liability to its owners. This means that the owners are not personally responsible for the debts and liabilities of the business. The disadvantage is that C Corporations are subject to double taxation. This means that the corporation pays taxes on its profits, and the shareholders also pay taxes on their dividends.
5) S Corporation
An S Corporation is a type of corporation that provides its owners with limited liability protection and allows them to pass their business income through to their personal income tax returns, thus avoiding double taxation. There are several limitations on S Corporations including the number of shareholders they can have among others.
Once you register your excavation company, your state will send you your official “Articles of Incorporation.” You will need this among other documentation when establishing your banking account (see below). We recommend that you consult an attorney in determining which legal structure is best suited for your company.
4. Secure Startup Funding for Your Excavation Company (If Needed)
In developing your excavation company plan, you might have determined that you need to raise funding to launch your business.
If so, the main sources of funding for an excavation company to consider are personal savings, family and friends, credit card financing, bank loans, crowdfunding and angel investors. Angel investors are individuals who provide capital to early-stage businesses. Angel investors typically will invest in an excavation company that they believe has high potential for growth.
5. Secure a Location for Your Business
Here are some steps to follow when finding a location for your excavation company.
- Look for a city or town that is in need of excavation services.
- Research the area to make sure it is a viable location for your business.
- Become familiar with the local zoning laws and regulations.
- Contact the local government to inquire about permits and licenses you may need to operate your business.
- Find some suitable sites within the area by reaching out to landlords or property owners.
- Once you have found a location, be sure to visit the site and assess its suitability for your needs.
If everything checks out, you can proceed with setting up your business in that location.
6. Register Your Excavation Company with the IRS
Next, you need to register your business with the Internal Revenue Service (IRS) which will result in the IRS issuing you an Employer Identification Number (EIN).
Most banks will require you to have an EIN in order to open up an account. In addition, in order to hire employees, you will need an EIN since that is how the IRS tracks your payroll tax payments.
Note that if you are a sole proprietor without employees, you generally do not need to get an EIN. Rather, you would use your social security number (instead of your EIN) as your taxpayer identification number.
7. Open a Business Bank Account
It is important to establish a bank account in your excavation company’ name. This process is fairly simple and involves the following steps:
- Identify and contact the bank you want to use
- Gather and present the required documents (generally include your company’s Articles of Incorporation, driver’s license or passport, and proof of address)
- Complete the bank’s application form and provide all relevant information
- Meet with a banker to discuss your business needs and establish a relationship with them
8. Get a Business Credit Card
You should get a business credit card for your excavation company to help you separate personal and business expenses.
You can either apply for a business credit card through your bank or apply for one through a credit card company.
When you’re applying for a business credit card, you’ll need to provide some information about your business. This includes the name of your business, the address of your business, and the type of business you’re running. You’ll also need to provide some information about yourself, including your name, Social Security number, and date of birth.
Once you’ve been approved for a business credit card, you’ll be able to use it to make purchases for your business. You can also use it to build your credit history which could be very important in securing loans and getting credit lines for your business in the future.
9. Get the Required Business Licenses and Permits
To start an excavation company, you will need a business license and a residential contractors license. You may also need other permits, depending on the type of excavation work you plan to do. For more information on what licenses and permits you will need, contact your city or county government.
10. Get Business Insurance for Your Excavation Company
The type of insurance you need to operate an excavation company will depend on the type and scope of the business.
Some business insurance policies you should consider for your excavation company include:
- General liability insurance: This covers accidents and injuries that occur on your property. It also covers damages caused by your employees or products.
- Auto insurance: If a vehicle is used in your business, this type of insurance will cover if a vehicle is damaged or stolen.
- Workers’ compensation insurance: If you have employees, this type of policy works with your general liability policy to protect against workplace injuries and accidents. It also covers medical expenses and lost wages.
- Commercial property insurance: This policy covers business property damages caused by fire, theft, or vandalism.
- Business interruption insurance: This covers lost income and expenses if your business is forced to close due to a covered event.
- Professional liability insurance: This protects your business against claims of professional negligence.
Find an insurance agent, tell them about your business and its needs, and they will recommend policies that fit those needs.
11. Buy or Lease the Right Excavation Company Equipment
To start an excavation company, you will need some heavy equipment. This includes a backhoe, dump truck, and bulldozer. You will also need a few smaller pieces of equipment, such as a shovel, pickaxe, and wheelbarrow. If you plan to do any blasting, you will need a supply of explosives.
12. Develop Your Excavation Company Marketing Materials
Marketing materials will be required to attract and retain customers to your own excavation company.
The key marketing materials you will need are as follows:
- Logo: Spend some time developing a good logo for your excavation company. Your logo will be printed on company stationery, business cards, marketing materials and so forth. The right logo can increase customer trust and awareness of your brand.
- Website: Likewise, a professional excavation company website provides potential customers with information about the services you offer, your company’s history, and contact information. Importantly, remember that the look and feel of your website will affect how customers perceive you.
- Social Media Accounts: establish social media accounts in your company’s name. Accounts on Facebook, Twitter, LinkedIn and/or other social media networks will help customers and others find and interact with your excavating company.
13. Purchase and Setup the Software Needed to Run Your Excavation Company
To run an excavation company, you need software to manage your business finances, software to manage your projects, and a computer-aided design (CAD) program to create your excavation designs.
14. Open for Business
You are now ready to open your excavation company. If you followed the steps above, you should be in a great position to build a successful business. Below are answers to frequently asked questions that might further help you.
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How to Start an Excavation Company FAQs
Is it hard to start an excavation company?
There is no one-size-fits-all answer to this question, as the ease or difficulty of starting an excavation company will vary depending on your skills, experience, and resources.
However, if you follow the steps above, you should be able to start your excavation company without too much difficulty.
How can I start an excavation company with no experience?
Starting an excavation company can be a difficult task if you do not have any experience in the field. However, there are a few things to do to increase your chances of success:
- Speak to other excavation companies in your area and ask for advice.
- Use social media platforms, such as Facebook and Twitter, to market your company.
- Attend trade shows and industry events related to excavation.
- Join professional organizations, such as a local building contractor association to network with other industry professionals.
- Obtain the necessary traditional business license and permits required to operate an excavation company in your area.
With some hard work and dedication, you can start an excavation company with no experience. However, it is important to remember that the success of your business will ultimately depend on the quality of your services. If you provide a high-quality service, you will be more likely to attract and retain customers.
What type of excavation company is most profitable?
The most profitable type of excavation company is a contracting company. A contracting company wins jobs by bidding on projects and then subcontracts the work to other companies. This type of company requires a lot of experience and up-front capital to win jobs, but it can be very profitable if it's managed well.
How much does it cost to start an excavation company?
Starting an excavation company can be costly. You will need to invest in equipment, such as bulldozers and backhoes, and you may also need to hire employees. Typically, the start-up costs for an excavation company range from $50,000 to $100,000. However, there are a few ways to reduce these costs. For example, you can rent or borrow equipment. You can also team up with other businesses that offer related services, such as demolition or hauling.
What are the ongoing expenses for an excavation company?
The ongoing expenses for an excavation company can vary depending on the size of the company, the equipment needed, and the location of the business. Some common expenses include: employee salaries, equipment rental or purchase, insurance, and marketing.
How does an excavation company make money?
An excavation company makes money by providing services to municipalities for public works projects, the private sector for construction projects, or environmental remediation services. Other ways an excavation company can make money are by renting or selling equipment, providing training or consulting services, or manufacturing products related to excavation.
Is owning an excavation company profitable?
There are many reasons owning an excavation company can be profitable. First, there is a high demand for excavation services because many construction projects require extensive excavation work. Another reason is that the cost of starting an excavation company is relatively low. Additionally, excavation companies can offer a wide range of services, thus reaching a large pool of customers. Finally, due to the specialization of their services, excavation companies can often charge high rates.
Why do excavation companies fail?
There are many reasons excavation companies can fail. One of the most common reasons is a lack of financial stability due to not charging enough for services or having too few customers to cover overhead costs. Another reason is that excavation companies can be complex businesses to manage. If the owner does not have a lot of experience or business knowledge, it can lead to failure.
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