Choosing to start a business of any kind is a big step. This is especially true for a construction business, because there are many unique and important aspects to consider. Learn more about the basics of starting a small construction business in the guide below.
Decide If You Are Ready
When it comes to starting a business, at some point you will just have to take the plunge, set up your company and start attracting clients. However, you also want to ensure you are as well-prepared as possible. For example, you will need some level of experience in construction or contracting to run the business effectively. You will also need to know what starting a small construction business will entail and whether you are willing and able to put in the effort your new company will need to survive and thrive.
Write A Business Plan
The creation of any new business should always be accompanied by the writing of a business plan. Business plans serve as a blueprint for how your business will be structured and run. A business plan will likely be necessary to secure any loans for your new business as well. The Small Business Administration has plenty of information on how to draft an effective business plan.
Know What Insurance You Need
Aside from being covered legally, you will also need adequate insurance coverage. Because of the high value on these projects, you want to ensure you have proper financial protection in place in case something goes wrong. Construction businesses should carry adequate liability insurance at all times, and company vehicles will need to be insured as well. If you have employees, you will also be legally required to carry workers compensation insurance. Even if it weren’t legally required, this insurance is important to protect your company from financial loss when having to pay compensation to an injured worker. An insurance agent can help you determine what levels of coverage you need.
Retain An Attorney
Having a qualified, quality attorney on your side is perhaps even more important for construction businesses than other types of businesses. The reason for this is because of the level of risk involved in construction work. Clients may sue for a number of reasons, and your own employees may sue under workers compensation laws if they are injured on the job. An attorney will help you set up your business under a recommended organizational type for tax purposes, and then they will be able to assist you in the future with any legal matters that might occur.
Consider State Regulations
Most states require at least some types of contractors to be licensed. For example, almost all states regulate plumbers and electricians, both of which are crucial for the construction of homes. If you hire a type of worker who needs a license, do some digging to ensure all candidates are properly licensed. If you are working with a contractor who requires a state license, ensure they have it.
Decide If You Need Employees
As a general rule, you should never hire an employee until you absolutely need them. If you try and hire too many employees at the beginning, you could run into financial trouble if it turns out you really couldn’t afford them. Too much hiring will also cut into your profit margins. You will likely have to start out doing much of the work yourself at the beginning, so be prepared for that. There are some jobs you can outsource as well, such as accounting and administrative duties. Once you’ve analyzed the numbers and the need for a new employee, you can start looking for top construction talent.
Know How To Find Good Contractors
In addition to any employees you hire, you will also need to be in contact with a network of quality contractors that do work in your area. These can include everything from plumbers to tree removal specialists. Many clients, for example, may want a pool, so you will need to be knowledgeable of good swimming pool contractors San Diego. All contractors you work with should be top quality and carry adequate insurance coverage. Obtain that proof of insurance and keep it on file.
In many ways, starting a new construction business is like starting any other business. Understand the risks and the challenges, and prepare for them as best you can. Your new company will stand the best chances for success.