The Complete Guide to Starting a Construction Business


Construction is one of the most popular trades for new businesses, but it also has one of the worst failure percentages. Over 60 percent of construction firms fail during the initial five years, either to a lack of business expertise and experience, financial constraints, or poor forethought. For instance, you would need to know certain terminology and practices like getting construction timesheets for the entire crew.

However, you are not required to be an insider who is already intertwined in the industry. You may start off by creating a solid foundation for your firm by examining and studying your industry, developing a detailed strategy for how you’ll manage it, and seeking advice. This can assist you in avoiding the difficulties that too many fresh construction firms face. Continue reading our article to find out where you should start. 

First, Research

The first thing to consider is whether or not starting a construction business is profitable where you are. If the case is that the construction sector is currently overcrowded and clients are satisfied with existing local businesses, it may be hard to break into the scene, much less build a profitable firm. 

To begin, you’ll want to establish just how many building businesses are currently in business in your region, what their specialties are, what their prices are, and how popular and successful they are. You should also form a comparable awareness of your consumer demographic, including how large the customer base is, their average age, and common characteristics. Look at sites like the Small Business Administration (SBA), look up local publications on the construction industry, browse local advertisements and magazines — you could even be ambitious and conduct a direct survey for some direct consumer feedback. 

Second, Figure Out a Plan of Action

Moving on, you can put that research to use by starting to develop a business strategy. Here are the questions we recommend you start with: 

  1. How will you stratify and operate the company? 
  2. What services and solutions will you provide?
  3. What kinds of jobs will you compete in? 
  4. Who is your core demographic? 
  5. The initial amount of staff you’ll have 
  6. What marketing strategies will you employ to promote the business?
  7. What is the original expected cost of launching and operating the company? 
  8. What do you plan to earn? What other key performance indicators should be taken into consideration?
  9. How will invoices be sent to and structured for customers? 

If these questions sound too daunting to tackle due to a lack of experience in your team on formal business planning, don’t be afraid to reach out and outsource to more experienced professionals. There are also business mentorship programs available that can provide the extra affordable training you may need to execute your ideas.

Thirdly, Officialising Your Business Through Legally Registering

When you’ve finalized your business plan, it’s time to establish your company as a legal entity that could give personal liability coverage, legal advantages, and tax advantages. Typically, establishing your business is as straightforward as filing the name of your firm with state and municipal officials. However, because not every state immediately provides these, you should additionally register your firm with the national government to obtain your federal tax ID or Employer Identification Number (EIN). You will then be able to register your trademark company logo with the US Patent and Trademark Office.

Fourth, Apply for Permits and Licenses

Permits are required by federal law for various commercial activities, including transit, mining, and drilling. Extra-large and heavy automobiles, for example, require specific permissions. That implies you could require a permit if you’re moving large construction materials, premade walls, or machinery. 

Fifth, Get Your Insurance in Order

Given the hazardous nature of the work, protect not just yourself, but your entire team with workplace insurance and liabilities. Incidents occur, and it’s critical for every construction company owner to be aware of all potential responsibilities. Despite maybe not being financially equipped to acquire a full coverage contingency plan, do realistically plan and prepare ahead for the state of your company if something went wrong. Almost all states and contractual arrangements will need you to have proper employers’ compensation plans at the minimum. However, you might require overall liability insurance.

Sixth, Acquire Sufficient Financing

If you’re unable to fund out of pocket, there are many options to take advantage of. Bank credit, private loans, credit unions, federal loans, and funding schemes are examples of these. Check out comprehensive government resources available for locating assisting loans and grants.

You should consider how you’ll secure funds for your initiatives in addition to basic finance. Infamous for very poor profit margins due to the erratic nature of construction billing cycles, ensuring cash flow is crucial. We recommend adopting a draw method instead of putting up money ahead for materials and equipment before payment — late payments beware! A draw method will ensure you a sum of money upfront from the client for initial material purchases. As the project progresses, you can charge systematically.

Lastly, Expand Your Company

Customer loyalty and company credibility are two of the most important aspects of industry longevity. Being transparent and honest is the greatest way to achieve customer satisfaction with every project. As often as reasonable, be honest with your customers over the duration of the completion of the project from the start. Continually update them so that they are aware of any issues that develop. Your client contracts should also include a clear project timeframe,  as well as contingency time for unanticipated delays caused by adverse weather, equipment malfunctions, or other factors. 

Such agreements should always be formalized in contracts to safeguard the company, but also your clients. Accountability and the upfront nature will create trust in your customer relationships and increase credibility. 


It’s not going to be an easy journey. For an industry with high failure rates, it’s important to learn from those who have experienced it all. The greatest advice anyone can give you is to not go it alone. Join trade groups, network, and seek assistance from specialists.