How To Start A Construction Company: The Ultimate Guide

Many people dream of starting their own business; however, it’s crucial to recognise that even though owning a business is a highly rewarding and fulfilling venture, it can also be a challenging and daunting experience if you don’t get off on the right foot. When it comes to starting your own construction company, it is imperative that you don’t take shortcuts at any stage of the planning and development process.

Whether you envision yourself as the most successful contractor in your local area or you want to be the top company that handles a technical building niche, there’s a significant amount to consider on the road to becoming a successful construction company. It’s essential that you ensure everything is in place before you begin trading, such as creating your business plan, training, financing your business, naming your company and registering with Companies House. If you’re interested in starting a construction company, or maybe you’ve already begun and are looking for advice, our ultimate guide will help get you off to a good start.

Getting Started: What Is A Construction Company?

When it comes to starting your own construction company, it’s essential that you understand the direction you want to take, as this will determine what your target market will be and if there are any niches that you’ll need to consider undertaking. Many people looking to begin their own construction company take the time to look at what is currently available in their local areas; this is a great way to understand where the gaps in the market are and how your current skills will fit into those gaps.

A construction company is rarely a single entity and typically encompasses a wide variety of services and roles in the private and commercial sectors. There are many different types of construction company including small renovations contractors, owner-builders, and general contractors, and it’s vital that you understand the difference.

• Small Renovation Contractors: Small renovation contractors are often where general contracting businesses begin. This type of contractor typically works on projects that require modest amounts of capital and usually take on jobs such as office renovations, small-scale commercial work, or home alterations. As a result of the nature of their work, most small renovation contractors have no need for an office or site base, as they collect the materials for each job from suppliers at the start of the project and typically complete paperwork at home during the evenings and weekends.  
• Owner-Builder: When a company operates as an owner-builder, it is not classified as a contractor; this is due to the nature of their business as an owner-builder typically only builds for the ownership of the company to later rent, sell, or operate upon completion of the build. Most owner-builders run general contracting businesses or work as construction managers alongside their primary operations as owner-builders.
• General Contractors: General contractors are typically experts in alteration or building work and tend to have expert technical skills in niches that allow them to win the most lucrative restoration and building contracts. A general contracting construction company can typically provide a range of trades within their workforce as they often specialise in a variety of sectors and trades. Most general contractors work on large scale projects in both the private and commercial sectors. 

Once you decide where you would like to begin your construction company, whether that’s as a contractor or owner-builder, it’s essential that you understand the differences between sole traders, partnerships, and limited companies. This will also determine the type of construction business you can undertake as each type has different liabilities, tax requirements, and costs involved. 

Developing A Business Plan

It is vital that you conduct thorough planning and market research when you begin building your construction company. A detailed business plan is an opportunity for you to outline your goals and business objectives so that you can clearly understand how to turn your idea into a viable enterprise. 

Before you consider starting the company and looking into trading, you should ensure that you have done the appropriate market research in order to understand the potential profitability of your business idea. During the market research, you will be able to identify whether there are other construction companies offering the same service in your local area; analysing your competition will provide you with a solid foundation for how your company could fit into the current market and whether or not it will thrive. It is also the perfect opportunity to gain insight into what other construction companies in your area are charging as well as their overall customer reputation. Suppose there are already a significant amount of reputable constructions companies in your current location. If you are unable to identify how you could fit your business into the market, it may be worth altering your business plans as well as your overall ideas.

One of the most effective ways to get a better understanding of the current demand for construction services is to speak to local residents and businesses. The insight from these conversations will provide you with the best sense of whether your target market feels there is a need for a construction company in the area. 

Writing Your Business Plan

A detailed business plan is vital for the success of your construction company as it will not only allow you to establish clear goals and procedures but is the best way to ensure your company gets off the ground. This formal document should cover everything you need in order to run your company successfully. If you are going to need funding from a potential lender, they will require this document during the process to assess the viability of the business. 

You should split your business plan into several sections that outline in detail how you will structure your company. The business plan will need extensive sections on who your target market is, how many employees you intend to hire, what constructions services you will provide, and how you will market your business in order to differentiate it from the local competition. Finally, there should also be a section that focuses on your plans to maintain the company and your projected earnings.

Essential Tools and Heavy Equipment

Every construction company needs tools and heavy equipment to complete their projects on time in order to ensure a positive experience for their clients. It will undoubtedly delay the project if your workers are waiting for the right tools and equipment. 

When you first start out, you will most likely be working on a tight budget, and it isn’t practical to order a vast range of tools or equipment that you may end up not using. Consider the projects that you will be undertaking in the early days and what you will need for each of them. This will provide you with the best insight into what you need to purchase before you begin trading without having to make a significant investment on what you may need as you grow.

If you are going to begin as a general contractor, it is like that you will need a significant inventory of tools and heavy equipment to ensure you are able to take on the larger projects. Excavators, loaders, and protective gear will be essential and are worthy investments for every general contracting construction company. 

You also want to ensure your workers are efficient when loading or unloading materials for a job; this is where investing in a suitable forklift comes in handy. Your workers will be able to move materials around the construction site to where they are needed more efficiently than if they were to carry everything by hand. This will allow your employees to continue working when deliveries arrive instead of stopping to help unload and take the materials to where they’re needed. If you’re not sure where you can get a good forklift, check out Trucks Direct UK for their wide range of new and used machines to find your perfect forklift. They offer a range of options, so you can find the right one for your business. 

Rules And Regulations

When you are setting up your construction company, there is a wide range of industry-specific rules, regulations and tax requirements that you need to be aware of, which includes the Construction Industry Scheme.

The Construction Industry Scheme was set up by the government in order to create a payment handling system that companies could use to manage payments made by contractors to sub-contractors. Whether you have chosen to set up your construction business as a sole trader, partnership or limited company, you will need to register your organisation under the Construction Industry Scheme in order to operate in the construction industry.

Health And Safety

Appropriate health and safety procedures are vital in every business; however, when it comes to construction, it is imperative that you have the right health and safety regulations in place due to the nature of the job and physical demands that come with the work. You and your future employees will need to have the relevant expertise and skills to carry out the day to day work confidently and safely. You will be responsible for ensuring that all staff are thoroughly trained and up to date on the health and safety procedures they need to follow when carrying out their roles. 

Building Regulations

As you develop your business, it is essential that you have a solid understanding of building regulations before your begin trading. These standards of construction and design will apply to the majority of the private and commercial projects that you are contracted to work on, which is why it is crucial that you understand what the regulations cover, who is responsible for them and how they are enforced.

VAT Registration

VAT registration is mandatory if you expect your annual turnover to exceed £85,000; however, if when you developed your business plan, your projected yearly earnings were below £85,000, then the decision to register for VAT is voluntary.