To start a home building business, you need two main things: construction expertise and financing. You don’t need a contractor’s license because you can hire general contractors to do the construction.
However, you will need to know everything from how to get a permit to how to get a final certificate of occupancy. On the other hand, you need a source of capital.
If you know people with money who will invest with you, you’ve got it made. Otherwise, you may need to convince a lender or bank to fund you.
Successful home-building companies have emerged in times of recession and boom, although it may be easier to achieve your goals when the real estate market is hot.
3 Steps To Start A House Building Company
Study The Local Market
If a building firm is possible in your area, that should be your first concern. After all, if customers are content with the current local businesses and the building market is already oversaturated, it may be challenging to break into the sector, let alone establish a profitable company.
Start by conducting market research. You should know how many regional contractors are active in your community, their areas of expertise, rates, and reputations.
In addition, you should be familiar with your potential consumers – how many there are, their typical age and status, their interests, and so on. Knowing these elements can help you create a more robust business plan and offer you a competitive advantage once you enter the field.
Where Can You Find Home Improvement Research?
One of the first and probably most accessible places to start your market research is the U.S. Small Business Administration (SBA). It offers a wide range of free resources that provide complex data about customers and business markets.
For example, you can look up your target demographics (age, gender), employment statistics, buying habits, and more at the SBA. You can also look at production and sales statistics for your market.
While the SBA is a good starting point, it only provides a general overview so you may need more detailed information. In that case, local industry publications can help you do more in-depth research.
Most local publications can be found by typing the name of your city + “construction industry publications” into Google. You should see a list of publications or direct links to some construction journals in your area.
From there, you can either browse the digital issues or, if they’re not available, set up a subscription. These magazines are full of ads and articles about local businesses and the state of the construction industry in your area.
Conduct Your Market Research In The Construction Industry
One of the best ways to identify your potential customer base is to talk to them directly. Try surveys or questionnaires, focus groups, or individual interviews to get direct customer feedback.
Depending on your approach and contacts, this can be time-consuming and costly.
Before you start reaching out to your network or performing paid market research, ensure you have a strong concept of what questions you want to ask.
Think about general questions like:
- How often are contractors hired in your industry?
- Their top issues with contractors
- What is most important to them when hiring a contractor?
These answers can give you insight into how to shape your business plan.
Write Your Business Plan
Once you feel that you have a good understanding of your local market, you can start writing a business plan.
One of the most crucial documents you’ll draught when starting a business is this one because it may keep your enterprise on course and improve its chances of success.
You will also present this plan to lenders who will help you obtain funding. Therefore, it is essential to be detailed and use your market research wisely.
Standard business plans include the following:
- How you will structure and manage the business
- What types of services you will offer
- What types of contracts you will bid on
- Who is your target market is
- The number of employees you will initially employ
- How you plan to market yourself
- The estimated initial costs of starting and maintaining the business
- How much do you plan to earn in the first year and other important metrics
As a contractor, however, you should consider construction accounting processes in your business plan. For example, how will you handle billing? Some clients want a fixed flat rate, while others may wish for a breakdown by time and materials.
Net invoices after 30 days may be standard, but will you offer discounts to incentivize faster payments? It would be helpful to also think about whether you plan to operate as a cash or accrual business and whether you will recognize revenue by contract completed or by a percentage of completion.
Contact a construction accountant if you are unsure what is best for you. They can discuss some of these critical business factors with you.
Although starting a construction company might be difficult, using these tactics will give you the best chance of success. Our consulting services can help you with every process step, including acquiring client leads, preparing estimates for your projects, and even following up.
Contractors are creative and dynamic by nature and constantly find ways to run their firms successfully. The rate of business closures in the first five years is among the highest in the construction sector.
Therefore, establishing a solid foundation and maintaining success is the most challenging obstacle. Don’t go it alone is the best advice anyone can give you for beginning your own construction company.
Join trade associations, network, seek assistance from experts like accountants specializing in the building sector, and use construction accounting software. Connect with people who will give you the resources and support you need to turn your hard work into real success.