5 Realities of Running Your Own Construction Business

Running any business requires financial acumen and a hefty dose of old-fashioned elbow grease. Success in the construction industry, however, requires further knowledge. You need to follow building codes and comply with legal requirements — and that’s just the tip of the iceberg.

If your passion is to create, you can run a highly-successful construction business. Learn about the five factors below to increase your chances of earning a tidy profit. Once you master these concepts, there’s no limit to how big your enterprise can grow.

You Need to Promote Yourself

It’s essential to market yourself effectively. On average, construction firms allocate 13 percent of their budget to getting their name out there. Even if you become a household name in your area and niche, you need to continuously attract new clientele to remain viable.

Some marketing ventures cost more than others, so use free and low-cost options when you start out. For example, a blog is inexpensive but helps establish you as an expert in your field. Ask past customers to share reviews of your work on social media.

You don’t need to limit yourself to digital promotion. Seek opportunities to volunteer in your community, and wear clothing with your company logo.

You’ll Need to Budget Your Upfront Costs

Depending on what projects you choose to tackle, you may incur substantial upfront costs. For example, if you venture into ground-up builds, land costs can account for 60 percent of your budget, depending on how desirable the area is.

You’ll likely need special equipment, and it’s your decision whether to lease or finance. While you can lease tools with no money down, payments will cost more over time. The terms make sense, however, if you only need a backhoe for one project.

If you plan to use the equipment for multiple projects, financing is the best option. You will eventually own the machine, and it will become an asset to your business. Unlike leasing equipment, however, you will need to pay for repairs yourself.

You also need to budget for personnel. If you run a small handyman service, you may only need to hire one or two helpers. If you do commercial projects, on the other hand, you’ll need a sizable staff and budget.

You’ll Need Plans to Manage Your Money

When you run your own business, you need a system for estimating and collecting money. Decide if you want to create bids on a per-project basis or bill an hourly rate. A flat rate guarantees you a fixed number paid upon project completion. However, if your work takes longer than anticipated, an hourly rate results in more money in your pocket.

Determine how much to charge upfront and how to bill. Many construction companies request money for materials upfront and bill for labor after. For larger projects, however, you may need to spread down payments over several weeks or months, depending upon your customer’s budget.

Exercise caution if clients request to pay nothing until after project completion. Yes, they may have dealt with unscrupulous contractors in the past, but you risk economic hardship if they refuse to pay.

You Have to Protect Your Investment

You need to take care of certain legalities to run a successful construction business. Incorporating your business protects your assets if someone decides to sue you.

As a contractor, you’ll also need to carry several types of insurance:

  • Professional liability insurance protects your company against negligence claims due to mistakes.
  • If you own or lease a building, property insurance is a must.
  • You will also need to invest in worker’s compensation insurance once you hire your first employee.

Customer Service Takes the Whole Team

Do you want your team to create a positive customer experience? If so, you need to hire the best — and keep them on board.

If you want your crew to provide exceptional customer care, provide for their basic needs and more. A living wage puts food on your employees’ tables and keeps financial stress from affecting work performance.

Encourage employees to take a vacation and de-stress. 

Succeeding in the Construction Business

When you commit to customer service and exercise sound financial sense, you can succeed in the construction industry. If you live to build, you can craft the business of your dreams. ~ Holly Welles

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Holly Welles

Holly Welles is a freelance writer covering real estate, business and the construction industry. You can find more of her work on Twitter (@HollyAWelles) or on her personal blog, The Estate Update (www.theestateupdate.com).