How to Start a Construction Company [Step-by-step Guide]

Investment, ideas, profits & more

With the increasing urban planning and development in India, construction companies are gaining huge business potential. A construction business can reap huge profits and become a successful business. Even a mid-scale construction company can earn a revenue of crores in a year. If you want to know how to start a construction company, read this article. We provide you with a step-by-step guide to building robust and profitable construction business.

How to start a Construction business?

1. Research

The first step towards starting any business is doing thorough research about the industry. Strong research will help you understand the market, the services needed, skills, marketing strategies, etc. This information will be extremely helpful in building your business.

Construction companies can be of various types like residential, commercial, industrial, consultants. All these businesses are linked to the construction business but provide completely different services. For example, consultant companies only help in planning and designing the construction, but civil engineering companies look after the project's actual construction. All these varied services require different levels of expertise, and you will learn about them through research.

Good research will help you in understanding the various requirements within the industry. It will also help you stay up to date with the new technological trends and new business ideas.

Research can solve all the doubts you have about starting your own business with research. Even the smallest queries will find an answer. Research is also an ongoing process for all companies since it helps keep you up to date with the market. It is suggested not to stop your research once your business has started, or it will significantly affect your growth.

2. Business model

Once you have completed your research, you must start drafting your construction company business plan. A business model is a specific business plan which defines your business. It lists down the services offered by you, your goals, specialisations, etc. Once you have completed thorough research, writing a business model will be easy. You now only have to choose between the kind of business you want to start and how you plan to go about it.

Your business model should also include the scale at which you want to start a business. This includes determining your capital and investment requirements. A good business plan will be necessary if you wish to take loans or onboard investors.

Since your business plan includes your short-term and long-term goals, it will help create a path for your business and the next steps that you need to take to achieve those goals.

3. Legal Compliance

Legal compliance is crucial before starting a construction company. Any error in compliance can lead to financial losses and affect your reputation and even the closure of your business. Consulting a lawyer is important to fulfil all the legal requirements. Some of the basic requirements for starting a construction business are:

• Company Registration: Whether you are a sole proprietor or a team, getting your company registered with the Ministry of Corporate affairs is necessary. While this is not a mandatory procedure if your revenue is below a certain limit, registration does have tax and other benefits. Thus, incorporating your company can be beneficial. You can start the registration process online by visiting the ministry's website.
• GST registration: In order to claim business expenses and input credit on raw materials, having a GST (Goods and Services Tax) registration for your business is mandatory. Even for procuring raw materials and receiving payments, having a GST registration is required. Hence, register your business for GST.
• Trademark: Building your brand identity is important for any business. Trademark registration ensures that your brand logo and name are not copied by anyone else. While acquiring a trademark registration is not mandatory, it is beneficial to build a brand identity. You can apply for a trademark online.
• Licenses: Depending on the nature of your construction business, you will be required to obtain certain permits before starting your business. These differ from industry to industry and sometimes even state to state. Hence, it is best to consult a lawyer for this process.

4. Investments

Starting a business in construction may require investing some money. While you can decide the scale of your business and increase/decrease your investments, it is better to find resources for investment right from the beginning. The two primary ways to get investment are:

• Bank Loans: Banks provide loans for running a business. Nowadays, there are special loans for small businesses and startups as well. You can enquire with your bank about it. Bank loans have higher interest rates and have to be repaid within a certain period.
• Investors: You can even pitch your business ideas to investors who will invest money into your business. Crowdfunding platforms, Business incubators, personal networks, etc. will help you find an investor. Investors are generally keen on investing in the best business ideas. Investors will have a stake in your company and will take a certain ratio of profit.

Choose an option that suits your requirements and financial capabilities. If you do not have resources and are wondering how to start a construction company with no money, there are options for you. If you have the necessary skills and expertise, you can create a consulting company in the construction industry. This business requires no raw materials and other investments and can be started with no money.

5. Network Building

As a construction company, you will constantly require raw materials, workers, architects, etc., for your projects. Thus, you must build a team of people that will help you smoothly run your business. You should do network building with four kinds of people:

• Team Members: These are people who will directly work with your team, either full-time or part-time. Find people who are skilled and enthusiastic about working with your business, and build your team. A good team can make or break your business.
• Upstream Market: Upstream market refers to the market which deals in input materials like cement, tools, machinery, etc. At all times, your business will require raw materials, and thus, building contacts with the providers are crucial to running your business. Enquire with various sellers and dealers about their prices and quality and narrow down on a few vendors. Always ensure you have a backup.
• Downstream Market: This is the opposite end of the spectrum. The downstream market constitutes your customers. Building a network with people within your target audience is important to get newer projects and grow your business.
• Direct Competitors: It is important to build a healthy connection with your competitors. Often in difficult situations, competitors turn out to be great mentors. Making a connection with them will help you stay in touch with the industry experts and find new opportunities.

6. Marketing and Branding

If you're starting a construction company, then having an online presence has become crucial for every business today. Marketing and branding will help your business reach more people, gain audience trust, and showcasing your work. Social media presence, especially for construction businesses, is very less today. You can leverage this to your advantage and grow your business.

Traditional marketing tools like paid ads, funnels, etc., are also effective. If you have the budget for the same, you should consider investing in marketing. However, even the free resources of social media platforms are enough to start with.

7. Accounting

Running a small construction business can be extremely stressful, but managing and tracking your expenses and investments is extremely important to avoid any financial sabbaticals. Using automated apps like OkCredit can be helpful to ease the process of accounting.

Accounting will also help you in analysing your company's growth. This is vital to understand your goals and failures.

Conclusion

Starting a construction business requires lots of knowledge and expertise. This can seem intimidating initially, but by following simple and small steps, you can create your business successfully. A well-planned and structured small business can grow into a big profitable company with consistent efforts. We hope this article helped you in understanding how to open a construction business. Follow these steps to start your business today!

Also read:

1) How To Start Real Estate Business?
2) The-5 Biggest Markets / Industries In The World
3) How Does The Real Estate Industry Work?
4) How Does The Mining Industry Work?

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FAQs

Q. How much capital will be required for this business?

Ans. It depends on the scale at which you want to start your business. If you do not have a lot of capital, you can start with a smaller scale and then grow your business.

Q. What are the different types of construction business?

Ans. Civil engineering business, commercial real estate, residential real estate, and renovation business are some types of construction business.

Q. Where can I research for my business?

Ans. You can use online resources, to begin with. You can consult experts in this field for further clarifications.