Starting a business

How to Start a Construction Company

From overcoming harsh winter seasons, to getting insurance, hiring the right staff and choosing quality equipment, a new construction company has a lot of it's to cross off. This is unfortunately the reason why it has one of the highest rates of failure, but that does not mean this will happen to you.

Research your market, drafting a concrete plan for how you’ll run your business and getting help will ensure that you have a strong foundation to grow your business on. It will also help you avoid the pitfalls that so many new construction companies run into. So where do you start?

Becoming A Licensed Contractor in 11 Steps

Before you start your business, there are many different types of contractors, and it’s important you choose the type that best suits your skill level.

  • General Contractor
  • Carpenter
  • Drywaller
  • Plastering
  • Painter
  • Wallpaper Installer
  • Heating and Air Conditioning
  • Mason
  • Roofer
  • Excavator
  • Demolition
  • Landscape
  • Concrete Specialist
  • Ironworker
  • Steelworker
  • Tile Setting
  • Floor Laying
  • Glass Glazing
  • Special Trade Contractor

1. Create a business plan

Like any new business, a construction company must have a business plan . This will be the road map that ensures you stay organized and on track with all your tasks. If you fail to plan, you plan to fail, so creating a prioritized plan which includes everything you need to do to get your business off the ground will help affirm success.

No two businesses are the same, so each plan needs to be tailored to your specific needs. In case you need help starting, Bplans offers different types of business plans. Each template is different depending on the various contractor types.

2. Determine what constructions regulations and licenses you’ll need

If you’re looking to start a construction company in Ontario, The Ontario College of Trades (OCT) regulates and monitors trades in the province and is responsible for issuing Certificates of Qualification to compulsory trades. However, the Electrical Safety Authority and the Electrical Contractor Registration monitor electricians within the province.

The OCT actively pursues and penalizes unregistered or uncertified tradespeople. All tradespeople must have their Certification of Qualification while electricians require a valid Electrical Contractor’s license. Some plumbers must also be licensed. Municipal bylaws dictate permit requirements for individual projects.

If you are looking to start a construction company in a province other than Ontario, check out this link for licensing information.

In Canada, the areas of law which are relevant to building works are as follows:

  1. Contract law – The law that governs agreements and arrangements between parties.
  2. Law of tort – The law that addresses, and provides remedies for, civil wrongs not arising out of contractual obligations.
  3. Legislation – Various statutes which govern the carrying out of construction operations and the delivery of infrastructure.
  4. Breach of statutory duty – Failure to carry out duties or to fulfil obligations imposed by legislation. For example, an injured person may be able to make a civil claim if it has suffered injury as a result of the breach (unless specifically excluded in the statute itself).
  5. Law of restitution – The area of law concerned with the award of remedies which have one common function: to deprive the defendant of a gain, rather than to compensate the claimant for loss suffered.

3. Secure contractor insurance

Comprehensive coverage that can withstand multiple projects, managing employees, and general business liability risks is critical to running a thriving construction business. As a contractor, there will be a lot of potential risks associated with the job because of all the moving parts. There is a wide variety of coverage specifically geared towards contractors, such as:

  • Commercial Property
  • Mobile Property
  • Commercial General Liability
  • Commercial Vehicles
  • Surety Bonds
  • Professional Liability
  • Pollution Liability

Without business insurance , your company will be left to pay for damages, tax liabilities and claims from its own pocket. Also, having insurance can win you more work. Most recruitment agencies and clients demand that contractors hold insurance as part of the contractual agreement. So if you don’t hold it, you’ll miss out on opportunities.

4. Source funding and financing

In today’s market, there are many demands for a small construction company or contractor. Canada Startups offers government funding for contractor businesses – making it easier for you to start your construction company. There are many ways to get funding for your business venture, including small business grants and business loans .

5. Buy or lease equipment

Having your own equipment means you get to decide how and when the equipment is used, as well as having control over the maintenance. The equipment will always be at your disposal whenever you need it and this will allow your employees/equipment operator to have a higher level of familiarity with the equipment – which could lead to higher productivity.

Buying equipment will have a higher upfront cost because of the down payment but monthly payments are usually lower than if you were to lease due to lower interest rates. When buying equipment don’t forget about the resale value in case one day you decide to trade or resell.

Other costs to consider include maintenance, repairs, transportation of equipment to the jobsite, and storage.

Leasing combines some of the benefits of both renting and buying. Lease options vary but are typically for a year or more. Leasing involves less cost upfront since you typically don’t have to make a down payment and it also frees up capital and doesn’t tie up credit lines.

Leasing also allows you the option of getting a new model every couple of years. Some leases offer flexible terms or seasonal payments which allow you to skip payments of pay less during slower months. Leases tend to have higher interest rates and higher insurance rates compared to purchasing equipment outright and there are huge penalties assessed if you break your lease early. This means you have to pay the entire lease term regardless of whether or not you are still using the equipment.

If you had rented the equipment you could simply return it if you no longer needed it and not incur any additional costs and if you had purchased the equipment you could simply resell it and recoup some of your costs. Some leases also include large penalties for damage and wear and tear on the equipment.

Leases are usually identified as either a capital lease or an operating lease though some manufacturers have variations on both. A capital lease means the lessee is treated as the owner of the equipment which means you are responsible for all maintenance, taxes and insurance which also means depreciation and interest on the equipment can be written off.

Capital leases include a bargain purchase option to buy once the lease terms are fulfilled. Capital leases are typically longer and the payments are typically higher than for an operating lease.

6. Hire employees or contractors

From a small business’s perspective, hiring a contractor could be a good option to hiring an employee because it requires less paperwork and responsibility.

Contractors don’t receive benefits packages or pensions and they must pay their own Canada Pension Plan contributions. Businesses don’t have to provide them with health insurance, life insurance, and other common employee benefits—all of which increase their costs.

A company that uses an independent contractor doesn’t have to do payroll, which involves withholding income tax and paying employment insurance (EI).

When you hire a contractor it is assumed that he is proficient at the service he is being hired for, meaning you need to train him.

Employing contractors rather than full-time employees gives companies more flexibility to meet the ups and downs of business, reducing their overall labour costs and helping them to better manage cash flows.

On the other hand, When you hire an employee, you get the advantage of being able to completely control and direct that person’s work during work time, to train the person in the way you want the job done, and to require that person to work only for you. You will develop a stronger relationship with your employees because you’re giving them a secure job – and this type of loyalty can lead to higher productivity.

Whether you go with contractors or employees, it’s important for any construction company to keep proper timesheets so you can calculate costs effectively.

Learn more about the differences between employees, independent contractors, and freelancers here .

7. Cover your health and safety obligations

If you intend to start a construction company in Ontario, take a read through the Ministry of Labour’s construction workplace safety regulations . Staying up to date on these regulations is important for ensuring that your projects run smoothly without injury.

The Canadian Federation of Construction Safety Associations ( CFCSA ) works as an umbrella organization for provincial and territorial Construction Safety Associations with interest in: promoting awareness of construction health and safety.

The CFCSA will work to:

  • Advance new initiatives that will enhance the quality and effectiveness of the Certificate of Recognition program.
  • Facilitate open discussion that balances the common interests of all the groups.
  • Recognize the unique provincial needs of individual provincial Construction Safety Associations.
  • Promote awareness of construction workplace health and safety management practices.
  • Avoid duplication of effort among participating organizations.
  • Promote employer and worker awareness of successful workplace health and safety programs.

8. Develop your pricing and estimating process

The way you price and create estimates for your clients will be based on a forecasted amount of how much time and money you will be spending on the project. This can include things like, equipment cost, labour, transportation, materials needed etc.

To ensure you are receiving payments on time with a professional invoice, use this free construction invoice template or if you’re a plumber you can check out this template .

9. Join relevant trader associations

Trade associations are joined voluntarily by businesses organized on a geographic or industrial basis (or both) to promote and develop commercial and industrial opportunities within its area of operation. They also work to publicly voice the views of members on matters of common interest, or in some cases to exercise some measure of control over prices, output, and channels of distribution. An example of a trade association is the Canadian Construction Association and well as the Canadian Home Builders Association.

Joining online directories like Google My Business, Yelp, Facebook and LinkedIn will improve your SEO strategies, and generate more lead opportunities by putting your construction company in front of a new audience.

10. Implement a marketing plan

Your new construction company needs eyes, and the marketing strategy will determine how many new eyes it will get. This step is especially important if you’re just starting out and haven’t created a name for yourself yet. It’s always hard to get people to trust you if you don’t have many years under the belt, but the right marketing techniques can make a person feel more comfortable with choosing you as a contractor.

Here are some tools you can use in your marketing plan :

  • Create a Website: This will give people a sense of your professionalism, and also inform them of the types of work you do. If you are unsure about creating your own website, you can also hire professional web design services to get you started.
  • Invest in PPC Ads: If you want to obtain new, high-value construction leads, invest in pay-per-click (PPC) advertising. PPC is an excellent contractor advertising idea because it allows you to reach users that are more likely to convert and become leads.
  • Create Social Media: You can stay connected with your new leads through social media marketing. By investing in social media marketing , you can deliver content to your audience and interact with them. This is also a great way to stay on top of current trends.
  • Share Knowledge with Content Marketing: Content marketing is a crucial part of digital marketing for contractors because it is an integral part of other strategies. It helps improve SEO, provides you with content to post on social media, and gives you something to link to in your emails. To start using content marketing, you need to come up with topics. You can use keywords to help you discover topics that matter to your audience, as well as rank in relevant search results.

11. Find the best construction apps to use

Your construction company needs the right software to ensure your projects run efficiently. Here is a list of some apps that will help streamline your process and iterate with the QuickBooks app.

  • Houzz Pro Key features include project management, lead management with client dashboards, and individual insights. Additional Houzz Pro features include an integrated online payment system, mood boards for projects, and white-labelling for communications. With Houzz Pro, professionals have the tools to manage clients and track progress for any project. A great feature of this app is that it also integrates with QuickBooks.
  • BuilderTrend provides pre-sale tools including a built-in customer relationship management (CRM) system, bid requests, and project proposals. Project management tools include scheduling, budgeting, timesheets, and more.
  • Buildxact is an easy-to-use construction management software uniquely designed for residential builders & trades, helping them easily and smoothly manage projects. Key features of Buildxact include equipment tracking, profit insights, benchmarking, job scheduling, and bid management.
  • Procore manages your projects, resources, and financials from project planning to closeout. The platform connects every project contributor with the owner and general or specialty contractor. The centralized dashboard allows managers to handle project details, schedule tasks, and view progress. It enables users to communicate across disparate teams, making it easier to work together by establishing a single source of information.

As a construction contractor, people put their homes in your hands, trusting in your professional capabilities. Why not do the same for your business and use professional accounting software like QuickBooks Online to help you manage your finances, track time and pay employees, and accept payments on the job.

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