Small Construction Company Business Plan – Deciding to start your own construction company can be an exciting, yet stressful experience. With so much research, reporting and paperwork to complete, it’s easy to get lost in the administrative details and forget the passion that drove you to start your business.
In fact, 68% of small business owners regret not spending enough time learning the basics of running a business in the first year. Fortunately, the process of starting a construction business is really easy, as long as you know where to start. Construction companies take time to design and build, so by starting early, you can set yourself up for success later.
Small Construction Company Business Plan
And while COVID-19 has caused manufacturing to shut down in major cities, there are still 36 countries where manufacturing is considered an essential service as of this writing.
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We’ve compiled everything you need to know to start your own business, from how to write a solid business plan to the types of insurance required and more. Here’s how to start a construction company, broken down into five steps. Click the links below to go to each section:
Thanks to the Internet, there is a wealth of free, publicly available information, as long as you know where to look. Here are some great sources of information to use when conducting market research:
Doing your research beforehand is optional, but it will make the rest of the process of setting up your construction company much easier. In particular, completing your research will make it much easier to complete the next part of the process: writing your business plan.
Every startup needs a business plan, not only to guide you in starting your company, but also to help you raise investment capital, get approved for loans, and more. Here are the steps you need to follow to write a business plan for your construction company:
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The executive summary is the introduction to your business plan. It should be short (one or two pages), short and sweet.
The Small Business Administration recommends that you include your mission statement, basic health information about your company, the products and services you offer, financial and financial goals, past achievements, and your future plans for the business. Your entire business plan will contain the same information included in your executive summary, but in more detail.
After the summary, give an overview of your company: who the founders are, when it was founded and what it does. You should also write a value proposition statement that explains why your company’s offerings are needed in your market.
You must also take into account here whether your business is structured as an S-Corp, C-Corp, or LLC and how ownership is divided if you are not the sole founder.
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In this section, you will need to provide research that demonstrates the existence of a specific need in your target market and why your company is uniquely positioned to meet that need.
This section is where you will go into detail about the products and services you offer. Discuss current or past projects that can serve as examples of your company’s offerings, if possible. Since construction is also highly dependent on sourcing equipment, highlight any existing partnerships you have with building suppliers, subcontractors, etc.
You may also want to include the type of contracts you plan to use with potential customers. Total cost, unit price, cost, and time and material contracts handle the cost of goods differently, so supplier requirements will vary depending on the type of contract you plan to use.
Provide an overview of your company’s finances and where you plan to have your finances in the future. If you don’t have past financial data, include projected estimates for similar documents and include the market research and analysis you used to make those estimates.
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You should also list all your credit obligations – this includes other secured investments, mortgages on any company assets, equipment loans, etc.
Finally, you’ll include the details of the financing you need or hope to raise. Include the amount you’re looking for now, as well as any additional expenses you expect to need in the future. Make sure you put every penny to a specific purpose, such as buying property, renting property, etc.
Charts, facts, research, or any other information that you think is important to your business plan but is too long or doesn’t belong in the document itself can be included in an appendix.
Once your business plan is complete, it’s time to make it official by registering your business with the state, national and local governments.
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1. Decide on a Business Entity: Choose a name for your business and decide whether to register as an LLC or a corporation.
2. Get an Employer Identification Number (EIN): Your EIN is your federal tax ID that you will need to pay taxes, hire employees, open a bank account, and apply for licenses. of business. You can apply for one online through the IRS website.
3. If you are filing as an S-Corp, file Form 2553 with the IRS: Although LLCs are governed by the state, corporations must file with the federal government.
4. Register for government services: Some states require paper registration, while others will allow you to register online. You can use the SBA database to find out what your state requires. (Remember that if your company operates in more than one country, you must register with each country’s government.)
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5. Register with local agencies: You will need to visit local government websites to find out what, if any, registration is required.
One of the biggest hurdles for new business owners is how to make the decision to set up a company. There are 4 main business models to choose from, each with their own strengths and weaknesses.
Sole Proprietorship: As a sole proprietor, you have complete control over your company. You are also fully liable, which means that if your business defaults on the loan, the bank can foreclose on your property 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 will separate your assets and liabilities from your company’s finances, which protects you as an individual.
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The downside to registering as an LLC is that it can be more difficult to raise investment capital. If you plan to rely heavily on investment funds to start your construction company, you should consider registering as a company.
C Corporation: A traditional corporation is a C Corporation. Like an LLC, a C Corp protects business owners from risk, but makes it easier to raise capital by allowing ownership of the company to be divided among shareholders.
Of course, shareholder involvement complicates the process, so the downsides of filing as a C Corp include more paperwork and a higher filing fee. C Corps are also double taxed – the corporation will be taxed as an entity and the shareholders will be taxed on the earnings.
S Corporation: Another common type of corporation is the S Corp, which is similar to the C Corp with a few key differences. S Corps cannot have more than 100 shareholders and all shareholders must be citizens or residents of the US.
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Registering your company as a legal entity is only half of the administrative process. As a construction company, you will also need to research and obtain the necessary licenses, permits and certifications you need to perform the various types of work.
You will need to seek specific licenses and permits required by your state, and in some cases, your municipality. To find out what licenses you need, check with your state contracting board and/or local Department of Labor. There are a few factors that vary from state to state, such as liability and workers’ compensation laws.
You should definitely make sure your construction company has insurance before starting any work to make sure you are covered in the event of an accident or emergency. You will also need different insurance policies to cover different aspects of your business, such as property and employees.
Now that you’re fully registered, licensed, and insured, you’re ready to start thinking about the most important part of the business: money.
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Most construction companies need money to rent or buy equipment and supplies needed to get started. Our guide to renting or buying construction equipment can help streamline the process.
The SBA offers a variety of low-interest loans designed to help small businesses succeed. Generally, SBA loans are only available to business owners with a long credit history and good credit score.
Some loans can be obtained for specific reasons, such as capital loans, which are specifically designed to cover day-to-day operating costs such as salaries or office equipment. Working capital loans are popular in seasonal industries where most of the company’s revenue for the year comes within a few months. Throughout the year, companies can apply for working capital loans to cover expenses when business is slow.
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