12/1/21, 6:33 PM How to Start a Construction Company in 5 Steps | BigRentz

  10% OFF Hauling When You Book Online!

Set Location (888) 242-4715 Sign In

Equipment
Solutions
Services

Resources
About
Blog

HOME
› THINK BIG BLOG
› HOW TO START A CONSTRUCTION COMPANY IN 5 STEPS

How to Start a Construction

Company in 5 Steps
Date:
May 4, 2020 by:
Jim Arabia
Share this article:

Recent Posts
Mass Timber: Is Wood
the Future of
Sustainable
Construction?

The Top Skid Steer

Brands and How To
Choose

10 Notable Construction
Equipment Suppliers

Substantial Completion:
What Owners &
Deciding to start your own construction company Contractors Should
can be an exciting, but overwhelming experience. Know

With so much research, reporting, and paperwork to Dumpster Enclosure

complete, it’s easy to get lost in the administrative Dimensions: How Much
Space Do You Need?
details and forget the passion that inspired you to
start your own business to begin with.
https://www.bigrentz.com/blog/how-to-start-construction-company 1/22
12/1/21, 6:33 PM How to Start a Construction Company in 5 Steps | BigRentz

In fact, 68% of small business owners regret not

spending enough time to learn the basics of
managing a business in the first year. Luckily, the
process of starting a construction business is
actually pretty simple, so long as you know where to
start. Construction companies take time to plan and
build, so by starting earlier, you can set yourself up
for success later.

And although COVID-19 has caused halts in

production in major cities, there are still 36 states
where construction is considered an essential
service as of the publish of this article.

We’ve compiled everything you need to know about

getting your company off the ground, from how to
write a solid business plan to what types of
insurance are needed and beyond. Here is how to
start a construction company, broken down into 5
steps. Click the links below to jump to each section:

https://www.bigrentz.com/blog/how-to-start-construction-company 2/22
12/1/21, 6:33 PM How to Start a Construction Company in 5 Steps | BigRentz

1. Gather Research About the

Construction Industry

Thanks to the internet, there is an abundance of

free, publicly available data available to you, so long
as you know where to look. Here are a few great
information sources that you can use while doing
market research:

U.S. Small Business Administration: The SBA

provides a broad range of tools to help small businesses
at every stage of growth, with specific tools targeted to
the construction & facilities industry.

U.S. Bureau of Labor Statistics: The BLS collects data

about employment in the construction industry, like job
openings, hires, separations, earnings, hours, and more.

Construction Industry Publications and Statistics:

Organizations like the Fails Management Institute, the
Construction Marketing Association, Data USA, and
other publishers like ours have construction
statistics that can provide valuable market insights on
the industry.

Local Industry Publications: Many construction

statistics vary widely according to geography, so
Googling construction organizations or publications in

https://www.bigrentz.com/blog/how-to-start-construction-company 3/22
12/1/21, 6:33 PM How to Start a Construction Company in 5 Steps | BigRentz

your town/city or county can provide an additional layer

of insight that can place your business plan a step above
the rest.

Doing your research ahead of time is optional, but it

will make the rest of the process of setting up your
construction company much easier. Particularly,
having your research completed will make it much
simpler to complete the next phase of the process:
writing your business plan.

2. Write a Business Plan

Every startup needs a business plan, not just to help

guide you through the process of starting your
company but also to help raise investment funds, get
approved for loans, and more. Here are the steps
you’ll need to take to write up your construction
company’s business plan:

https://www.bigrentz.com/blog/how-to-start-construction-company 4/22
12/1/21, 6:33 PM How to Start a Construction Company in 5 Steps | BigRentz

Executive Summary

The executive summary is the introduction to your

business plan. It should be brief (one or two pages),
comprehensive, and compelling.

The Small Business Administration recommends

including your mission statement, basic biographical
information about your company, the products and
services you offer, financial highlights and funding
goals, relevant past successes, and your future
plans for the business. The rest of your business
plan will contain the same elements touched on in
your executive summary, but in greater detail.

Company Overview

https://www.bigrentz.com/blog/how-to-start-construction-company 5/22
12/1/21, 6:33 PM How to Start a Construction Company in 5 Steps | BigRentz

After the executive summary, give an overview of

your company: who the founders are, when it
formed, and what it does. You should also write a
value proposition statement that states why your
company’s offerings are in demand in your specific
market.

You should also be sure to note here whether your

business is structured as an S-Corp, a C-Corp, or an
LLC, and how ownership is divided if you’re not the
sole founder.

Market Analysis

In this section, you’ll need to provide the research

that proves the existence of a specific demand in
your target market and why your company is
uniquely positioned to satisfy that demand.

Here are a few details you should consider including

in your market analysis:

State of the Industry: Provide data that demonstrates

that your target market is healthy and capable of
supporting your new business.

Your Target Market: Cater your analysis to the market

that your products and services are targeting, using
customer demographics and specific, local data.

Growth Opportunity: Show that your target market is

not only capable of supporting your company, but that
there is enough demand to allow your company to grow.

Market Share and Product Pricing: Calculate what

percentage of potential customers you’ll be able to

https://www.bigrentz.com/blog/how-to-start-construction-company 6/22
12/1/21, 6:33 PM How to Start a Construction Company in 5 Steps | BigRentz

capture compared to your competitors. Based on this

information, estimate a pricing plan that is both
competitive and profitable.

Competitor Research: Highlight your competitors’

strengths and weaknesses and illustrate how that will
inform your company’s business strategy.

Business Structure

Here is where you’ll describe your company’s

structure in detail. You should include:

Who owns the company and how it’s divided

Division of shares among investors, if you have any

Your company’s legal structure (corporation or LLC)

Organizational layout

Number of current employees and necessary future hires

Remember that your goal is to explain how each

structural element contributes to your business’s
future success.

Products + Services

https://www.bigrentz.com/blog/how-to-start-construction-company 7/22
12/1/21, 6:33 PM How to Start a Construction Company in 5 Steps | BigRentz

This section is where you’ll go into detail about what

products and services you offer. Discuss current or
past projects that can serve as examples of your
company’s offerings, if possible. Since construction
also relies heavily on materials sourcing, highlight
any existing partnerships you have with building
suppliers, sub-contractors, etc.

You may also want to include the type of contracts

you plan to use with potential clients. Lump sum,
unit price, cost plus, and time and materials
contracts all handle materials sourcing differently, so
your vendor needs will differ depending on the type
contract you plan to use.

Marketing + Sales

Here is where you’ll explain how you plan to reach

potential customers and convert them into clients.

Some points to highlight in this section are:

Value Proposition: Why your target customer needs

your company’s services and why your offerings are
more competitive than those offered by others in your
market.

Positioning: How you plan to find and reach your target

customers.

Promotion: The type of marketing or advertisement

strategy you plan to use

Sales Strategy: How you plan to convert marketing

prospects into contracted clients

https://www.bigrentz.com/blog/how-to-start-construction-company 8/22
12/1/21, 6:33 PM How to Start a Construction Company in 5 Steps | BigRentz

Financial Plan + Projections

Give a comprehensive overview of your company’s

current finances and where you plan to be financially
in the future. If you don’t have previous financial
data, include projected versions of the same
documents and attach the market research and
analysis you used to make those forecasts.

Here are some of the documents you should

include:

Income Statements or Projected Income

Cash Flow Statements or Cash Flow Forecasts

Balance Sheets or Projected Balance Statements

You should also document all of your debt

obligations—this includes other investments you’ve
secured, mortgages on any company property,
equipment loans, etc.

Finally, you’ll include the financial details of the

funding you need or hope to raise. Include the
funding you’re soliciting presently as well as any
additional rounds of funding you anticipate being
necessary in the future. Be sure to earmark each
amount for a specific purpose, like equipment
purchases, property leasing, etc.

Appendix

Any charts, notes, research, or other pieces of

information that you believe are relevant to your
https://www.bigrentz.com/blog/how-to-start-construction-company 9/22
12/1/21, 6:33 PM How to Start a Construction Company in 5 Steps | BigRentz

business plan but are too long or don’t belong in the

document itself can be added to an appendix.

Here are some documents that might appear in a

construction company’s business plan:

Charts, tables, and graphs

Detailed market analysis

Past project details

Permits or licenses acquired

Proof of insurance

Founder or founders’ resumes

Company organizational chart

News coverage

Once your business plan is complete, it’s time to

make it official by registering your business legally
with federal, state, and local governments.

3. Register Your Business

Registering a company is fairly simple. Here are the

steps to registering your construction business:
https://www.bigrentz.com/blog/how-to-start-construction-company 10/22
12/1/21, 6:33 PM How to Start a Construction Company in 5 Steps | BigRentz

1. Decide on a business entity: Choose your

business name and decide whether you’re going to
register as an LLC or a corporation.

2. Get an Employer Identification Number (EIN):

Your EIN is your federal tax ID which you’ll need in
order to pay taxes, hire employees, open a bank
account, and apply for business licenses. You can
apply for one online via the IRS website.

3. If you’re registering as an S-Corp, file Form

2553 with the IRS: Whereas LLCs are handled by
the state, corporations need to file with the federal
government.

4. Register with state agencies: Some states

require a paper registration while others will allow
you to register online. You can use the SBA’s state
lookup database to find out what your state requires.
(Remember that if your company operates in more
than one state, you need to register with each
state’s government.)

5. Register with local agencies: You’ll need to visit

your local government websites to determine what
registration is required, if any.

https://www.bigrentz.com/blog/how-to-start-construction-company 11/22
12/1/21, 6:33 PM How to Start a Construction Company in 5 Steps | BigRentz

https://www.bigrentz.com/blog/how-to-start-construction-company 12/22
12/1/21, 6:33 PM How to Start a Construction Company in 5 Steps | BigRentz

One of the biggest stumbling blocks for new

business-owners is the process of deciding how to
structure the company. There are 4 main business
structures to choose from, each of which has its own
strengths and weaknesses.

Sole Proprietor: As a sole proprietor, you have total

control over your company. You’re also totally liable,
which means that if your business defaults on a
debt, the bank can seize your personal assets as a
result.

Limited Liability Company (LLC): A Limited

Liability Company is designed to reduce the risk
associated with operating as a sole proprietor. As an
LLC, you’ll separate your personal assets and debts
from your company’s finances, which protects you
as an individual.

The drawback to registering as an LLC is that it can

be harder to raise investment capital. If you’re
planning to rely heavily on investment capital to start
your construction company, you should consider
registering as a corporation.

C Corporation: The traditional corporation is the C

Corporation. Like an LLC, a C Corp protects
business owners from taking on personal risk, but
makes it easier to raise capital by allowing
ownership of the company to be divided among
shareholders.
https://www.bigrentz.com/blog/how-to-start-construction-company 13/22
12/1/21, 6:33 PM How to Start a Construction Company in 5 Steps | BigRentz

Of course, involving shareholders complicates the

process, so the drawbacks to filing as a C corp
include lots of paperwork and a higher filing fee. C
Corps are also subject to double taxation—the
corporation will be taxed as an entity, and
shareholders will be taxed on dividends.

S Corporation: The other common type of

corporation is an S Corp, which is like a C Corp with
a few key differences. S Corps can’t have more than
100 shareholders and all shareholders must be U.S.
citizens or residents.

Additionally, S Corps are subject to pass-through

taxation, meaning only the shareholders are taxed
on their dividends.

Registering your company as a legal business entity

is just one half of the administrative process. As a
construction company, you’ll also need research and
obtain the necessary permits, licenses, and
certifications you need to perform different types of
work.

https://www.bigrentz.com/blog/how-to-start-construction-company 14/22
12/1/21, 6:33 PM How to Start a Construction Company in 5 Steps | BigRentz

4. Acquire Licenses, Certifications,

Permits & Insurance

You’ll need to look up the specific licenses and

permits required by your state and, in some cases,
by your municipality. In order to find out exactly what
licenses you need, consult your state’s Contractors’
Board and/or your local Department of Labor. There
are a handful of considerations that vary from state
to state, like liability and workers compensation
laws.

Here are some common licenses required for

construction companies:

State and Federal Licenses

These are the two main licenses required to perform

construction work:

General Contractors’ License: In most states,

construction companies need a general contractor’s
license. You can use this state-by-state guide to
determine what paperwork you’ll need and which
applications to file.

Specialty Contractors’ License: If your business

includes work like carpentry, painting, electrical, roofing,
HVAC etc. you may need to acquire a specific license for
that work.

If you plan to bid on government contracts, you’ll

also need to register as a government contractor.

Insurance

https://www.bigrentz.com/blog/how-to-start-construction-company 15/22
12/1/21, 6:33 PM How to Start a Construction Company in 5 Steps | BigRentz

You absolutely need to make sure your construction

company is insured before beginning any work
whatsoever to make sure that you’re covered in
case of an accident or emergency. You’ll also need
various specific insurance policies to cover different
aspects of your business like property assets and
employees.

General Liability Insurance: General liability insurance

protects you in case of worksite accidents, injuries,
property damage, etc.

https://www.bigrentz.com/blog/how-to-start-construction-company 16/22
12/1/21, 6:33 PM How to Start a Construction Company in 5 Steps | BigRentz

Property Insurance: If you have a physical office, you’ll

want to make sure you have property insurance that
covers you in case of property damage, theft, natural
disaster, or if a client is injured while on the premises.

Vehicle Insurance: Most construction requires the use

of at least some heavy machinery. If you own your
construction equipment, you’ll need to make sure that it’s
insured. If you opt to rent your equipment, you can either
provide your own insurance or purchase a waiver that
will reduce your liability for damage.

Workers Compensation Insurance: When an

employee is injured on site, your general liability
insurance will cover the immediate consequences of the
accident. However, if the injury causes lost wages or
long-term injury, you’ll need workers comp insurance to
cover those benefits.

Unemployment Insurance: If an employee loses their

job for reasons beyond their control (layoffs or company
closure, for instance), unemployment insurance provides
monetary assistance until they find a new job.

State Disability Insurance: If a job injury causes a long-

term disability that prevents the employee from being
able to work, they can file a state disability claim for
financial assistance.

Now that you’re fully registered, licensed, and

insured, you’re ready to start thinking about the most
important element of business: money.

https://www.bigrentz.com/blog/how-to-start-construction-company 17/22
12/1/21, 6:33 PM How to Start a Construction Company in 5 Steps | BigRentz

5. Find Funding for Your Construction

Startup

Most construction companies need funding in order

to rent or purchase the equipment and supplies
necessary to begin work. Our guide on renting or
buying construction equipment can help demystify
the process.

Once you decide what supplies you need, here are

several types of funding available for small
businesses:

Small Business Loans

The SBA offers a variety of low-interest loans that

are designed to help small businesses thrive.
Generally, SBA loans are only available to business
owners with a long credit history and a good credit
score.

Lender Match can help you find lenders that offer

SBA-guaranteed loans.

Working Capital Loans

https://www.bigrentz.com/blog/how-to-start-construction-company 18/22
12/1/21, 6:33 PM How to Start a Construction Company in 5 Steps | BigRentz

Certain loans can be acquired for very specific

purposes, like working capital loans, which are
designed specifically to cover day-to-day operational
expenses like payroll or office utilities. Working
capital loans are popular in highly seasonal
industries, where the majority of a company’s
revenue for the year comes in over a period of a few
months. During the rest of the year, companies may
apply for working capital loans to cover expenses
while business is slow.

Purchase Order Financing

For industries that rely heavily on materials sourcing,

including construction, there are short-term financing
options available to help companies cover the cost
of a project’s materials up front.

Purchase order financing organizations offer

monetary advances to help cover purchasing orders
and typically carry an interest rate of between 1.8%
and 6% per month.

Vendor Financing

Another way to finance materials is to work out a

financing agreement with the materials vendor.
Rather than a monetary advance, a vendor financing
agreement allows the construction company to
negotiate a longer payment term on an order without
incurring late fees or penalties.

https://www.bigrentz.com/blog/how-to-start-construction-company 19/22
12/1/21, 6:33 PM How to Start a Construction Company in 5 Steps | BigRentz

Vendor financing is especially useful if you decide to

use a contract with your customers that does not
stipulate any customer payment up front.

Grow Your Business

Don’t sit back and relax once your construction

company is off the ground. Every business decision
you make should be carefully considered with the
https://www.bigrentz.com/blog/how-to-start-construction-company 20/22
12/1/21, 6:33 PM How to Start a Construction Company in 5 Steps | BigRentz

goal of growing your business in mind. While

promotion is important, remember that the best
marketing strategy is high quality work that speaks
for itself.

Related Posts

  Is it Time to Remodel Your Company's Offices?

How to Design a Millennial-Friendly Workplace

  Change Orders for Construction Explained

  Construction Estimate Template (Free

Downloadable PDF, DOC, EXCEL)

  7 Steps to a Successful Project Closeout

  How to Build a Life Off the Grid

  Types of Bridges

  Homepage Slide 2

  Articulating vs. Telescoping Boom Lifts: What's

the Difference?

  How to Prepare a House for Sale

  Why Renting Construction Equipment Beats

Buying

Business Share this article:

Renters Resources Customer Care

https://www.bigrentz.com/blog/how-to-start-construction-company 21/22
12/1/21, 6:33 PM How to Start a Construction Company in 5 Steps | BigRentz

EasyRentz FAQs (888) 242-4715

Client Portal Rental Guides customercare@bigrentz.com
Service Areas Equipment
Industry Manuals
Solutions Case Studies Corporate Office
1063 McGaw Ave. #200
Irvine, CA 92614
Partners Links

QuickRentz Careers
for Rental Credit
Partners Application
Partner With Site Map
BigRentz
Investor
Relations

© 2021 BigRentz, Inc. All rights reserved. Terms of Service Privacy Policy

https://www.bigrentz.com/blog/how-to-start-construction-company 22/22