You enjoy home renovation projects, from the planning to the construction. So now you’re thinking, it could be a good business idea. But is it a sound one?
Construction is one of the best industries for startups. However, it is also one with the highest rates of failure. According to a report, about 63 percent of construction companies close within the first five years. It is because of poor planning, the lack of finances, or not retaining employees, perhaps due to a lack of good ideas for employee incentives. So It’s necessary to fully understand the amount of preparation and work involved before starting a construction business.
If you’re convinced that this would be a rewarding venture, make sure you’ve got the following concerns figured out.
1. Research
You should first research and determine whether having a construction company in your location is a good idea. If the market is already saturated with many construction companies, you may find it difficult to attract customers. Find out the number of similar businesses in your area, the services they offer and their charges. Similarly, understand the customers, like their income, lifestyle and other aspects that can help you get them to know better. Considering all these factors will help you decide on the scale of the business you need to set up and the services you need to provide.
You can also start with your research by checking out the U.S. Small Business Administration. You get access to a wide range of information regarding customers, such as the demographics, employment status, and annual income on the website.
2. Plan
Once you have completed the research, come up with a solid business plan. The plan should establish the goals of the business. It should have concrete steps regarding every stage of the process, including the time period and the money required to meet the goals. It would be best if you had a strong, well-documented business plan to help find investors and source funding.
A standard business plan should include the following:
- The services offered
- The management
- Target market
- Investment cost
- Operation costs
- Expected revenue for the first year
- Other important KPI’s
3. Registration
Once you have everything planned out, you need to register your business with the authorities. It will make your business a legal entity and provide liability protection, legal benefits and tax benefits. The process of registration is fairly simple. You can easily register your business with the local and state governments by providing the required details and documentation.
If you register your business at the federal level, you can get a Federal Tax ID that can help you trademark your business name and logo.
4. Licenses and Permits
Licenses and permits are important in a construction business. Depending upon various factors, like your location, business type, size, and the services you provide, you will require certain licenses and permits for operating legally. For example, if you are managing the logistics and transportation of construction materials, you will require special permits issued to oversized vehicles. Similarly, based on your location, you will need to check zoning ordinances issued by the SBA and acquire the necessary permits.
Without the right licenses and permits, you may face tax penalties or get involved in other legal complications. Thus, make sure you have everything in order before you start operations to avoid hassles in the future.
5. Office Space
Startups typically use residences as the “startup office.” It makes financial sense, since new companies may not have enough capital for a traditional office. Although you may have space in your home to function as an office, it may not look as professional as a commercial space. Your suburban address may not be as easy to get to as a city address for your business. So try and have a plan for when you can eventually transition to a commercial space.
6. Networking
You will need to network with material suppliers, contractors and other professionals in the field. You will likely require the services of either at different stages. For example, you may require the help of other contractors or labor outsourcing companies if you are lagging in a construction project and require additional human resources. Thus, it would be helpful if you maintain good relationships with others in the field. You will also need to have good relationships with industry professionals such as building inspectors.
There’s nothing wrong with turning your passion for home improvements into a business. Construction work can be lucrative when done right. So before you go from loving DIY to being a business owner, make sure you’ve got every detail worked out.
