The US construction industry is one of the largest worldwide, accounting for a staggering $1.3 trillion in 2019. The industry employed at least 7 million employees in 2020, most of which worked in construction contractor companies spread throughout the country.
Given how lucrative the US construction market is, contractor businesses keep springing up each year. But as the industry grows, so do the risks associated with running a contractor business. Construction startups have one of the ugliest failure rates in the world, with roughly two-thirds going out of business within the first five years.
Thankfully, there are simple ways to overcome the hurdles in the construction industry and guide your construction business to success. Here are 8 winning tips anyone starting a construction business should know.
- Start With a Robust Business Plan
The best way to give your construction startup a survival chance in a highly competitive marketplace is to craft a solid business plan. This business plan clearly establishes the goals of your business.
Be sure to include detailed plans for each stage of the process, as well as reasonable timeframes. Your business plan should also indicate how much funding you need to meet every goal you’ve set.
Try to include everything that you believe will help your contractor business to operate smoothly. Make sure that your business plan is thorough before supplying copies to financial institutions for funding.
- Decide on an Ideal Home Base for the Business
Many people who start a business initially operate from their homes. There’s no problem with this, but realize that soon you’ll need to move into a more official business location to legitimize your contractor business.
When it comes to a home base for your company, look for a property that has adequate office space and enough storage for your office. Consider the accessibility of the premises by both clients and employees as well. Don’t forget about parking space.
- Sort Out Legal Matters
Everyone who wants to work as a contractor needs to have the necessary legal documents to do so. The same applies to opening a construction contractor business.
You’ll need to apply for all the mandatory licenses, certifications, registrations, and permits before you start operations. Complying with the laws, regulations, and standards of the industry and your state instills confidence in clients and other stakeholders that you’re running a legit business.
Keep in mind that requirements can vary significantly depending on locality, city, and state. Do your homework to find out what regulations you need to comply with. If necessary, hire a legal professional to guide you.
- Adhere to Insurance and Tax Requirements
Set up a meeting with a reputable insurance agent to discuss the coverages you need for your contractor business. Generally, you need to protect your business assets, employees, and clients. Ensure you’re fully covered against work-related injuries, damage caused to other people’s property, personal liabilities, and so on.
It’s also important to remain tax compliant at all times. You may want to work with an accountant to iron out all the documentation needed when filing for deductions. When audits happen, you want to be sure you’re ready.
- Secure Business Financing
Before you start bidding on contracts, you need to make sure you have all the funding you need to get your business up and running. You need money to make purchases, pay rent, and lease or buy tools, equipment, and vehicles. You also need to be able to pay bills, meet payroll, and market your brand.
Learn about viable ways to raise capital, and choose the best option for you.
- Get It Right When It Comes to Hiring
Your hiring decisions can make or break your contractor business. Do you need a full-time staff, or is it more sensible to hire contractors whenever you have a project?
The lower costs involved with hiring contractors only when you need them, make this option more attractive when starting a business. You don’t need to worry about providing a salary and paying benefits when business is slow.
However, note that it may be necessary to have a full-time assistant. It’s beneficial for people who call your office to hear a familiar voice. Besides, your assistant can help keep everything running smoothly in your business when you aren’t around.
- Invest in Construction Software
IT has dramatically revolutionized the way people do business, and you need to take advantage of that. Find out what systems can streamline processes in your business and invest in them. As a construction contractor business, you may find residential remodeling estimating software helpful when it comes to preparing quotes, estimates, and re-estimates.
There’s also accounting software that can help you stay organized and accurate when it comes to managing your financial records. Learn what other small business software solutions you need to improve your business.
- Have a Solid Marketing Plan
Visibility is everything when it comes to attracting new customers. As a new business in a crowded industry, it can be challenging to get noticed. That’s why you need a creative marketing strategy to stand out.
At the center of your marketing plan should be a robust online presence. The vast majority of American consumers depend on the internet for information when deciding which brand to work with. Engage with your target audience through email, blog posts, and social media to win more leads.
Don’t forget about other marketing strategies, including word-of-mouth, offering discounts, and so on.
Establish a Successful Contractor Business through Proper Preparation
Establishing a contractor business is never a walk in the park, but it doesn’t have to be overly challenging. All it takes is thorough preparation. Use the tips we’ve shared in this guide to give you the best chances of success.
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