How to start a construction business
At any time, construction will be a demanded service, the demand for which is growing every day. As in all other investment projects, there will be its own peculiarities and nuances, therefore, at the initial stage, an important task will be to draw up a competent business plan for a construction company. Let's study the main points that will help you understand the essence of the issue, and understand whether it is worth opening such a business. Also, let's designate how much money is required to open a small construction company.
Market and Competitor Analysis
The first thing to note is that this line of business is characterized by very high competition. You need to remember that the slightest mistake can cost a construction company a lot of financial losses. This market is quite tough, it is costly, both financially and in terms of time.
The construction business can rightfully be called the most rated area of activity. This direction will be really profitable and promising, but for success you will have to make an effort. At the initial stage, you will need to decide on the construction category:
- civil engineering;
- industrial construction;
- road construction.
In order to choose a suitable direction of construction, it is necessary to carefully analyze the market. It is important to understand that in the second two areas the competition will be much lower. However, carrying out civil construction, a businessman gets the opportunity to provide himself with a large profit.
Considering the civil construction market, we can say that recently there has been a real tendency towards a decrease in the level of demand for apartments in multi-storey buildings. At the same time, the popularity of private houses is growing. In most cases, these are small cottages that can be classified as economy class and middle class.
Modern young people prefer not to buy ready-made houses, but to build on their own. This allows them to satisfy their tastes and requirements as much as possible. Home construction orders are transferred to private construction companies. In this regard, a very relevant idea will be the low-rise construction of private houses as a business. Will this business be profitable? Both large and small construction businesses are highly profitable. Of course, sometimes there are periods of reduced demand for services, however, with proper management, the business owner of a flock will not face a problem.
Low-rise construction is less risky than large civil construction. This is a great option for the initial stage of entrepreneurial activity. Starting with low-rise construction, the love of a businessman can expand the business and cover other areas. The only nuance that will have to be faced is the seasonal factor. In winter, the number of orders for low-rise construction decreases.
The main advantage of the construction business is its profitability, which is within 50–70%. This means that investments in an investment project will pay off in a very short time, they will increase significantly during the year. This is a really profitable and profitable business, but it is important to understand that potential problems and pitfalls await you.
Speaking about possible problems, it is necessary to correlate the possibilities and desires of a businessman. Get ready for the fact that a business in the construction direction will require significant investments at the start, especially if you want to open a serious construction company. When opening your own construction company, it is not recommended to immediately cover a large part of the market, that is, to work in several directions. Make a step-by-step plan for the implementation of activities and strictly follow it. It is better not to take on many orders for implementation at once if you know that you cannot fulfill them with the help of the production facilities that you have at your disposal.
The construction process in any settlement does not stop for a minute. Some companies build multi-storey buildings and cottages, others build shopping centers and factory workshops, and others are engaged in the repair and decoration of apartments. Therefore, many entrepreneurs are thinking about the possible prospects for such activities and the income accompanying it.
But where to start a construction business for a beginner? To answer this question, you need to consider all the stages of creating an enterprise, including a preliminary assessment of the demand and activity of competitors, finding a free niche, recruiting personnel and purchasing equipment. But the most important thing is to understand the structure of the industry, ways of interaction between construction companies, principles of division of labor and responsibility, as well as mechanisms of legislative regulation. Without this knowledge, a beginner entrepreneur risks repeating the mistakes of his predecessors and even losing money invested in the business.
Types and features of business
The number of possible business areas in the construction industry is estimated in dozens; even a novice entrepreneur will be able to find a suitable option among this variety, based on personal preferences. The scale of the projects being implemented in this case is determined by the volume of investments in the enterprise:
- Large business with investments of 100 million rubles or more involves the construction of residential areas and multi-storey buildings, industrial enterprises, educational and medical institutions, stations and airports, highways and railways, bridges and other similar objects;
- Medium business with investments of 20 million rubles or more includes the construction of private houses, cottage settlements, repair of multi-storey buildings and road surfaces, production and wholesale supply of building materials;
- Small business with investments from 500 thousand rubles - this is mainly the repair and decoration of apartments, the construction of country houses and outbuildings, the production of building materials on a "garage" scale, as well as work as a subcontractor with a narrow specialization (for example, roofing, installation of utilities, installation of windows and doors, insulation of buildings ).
- Architectural and design bureaus are exclusively engaged in the development and execution of project documentation. Such activities require not only experience, education and special knowledge, but also obtaining numerous permits and approvals. Therefore, this type of business is not available to novice entrepreneurs;
- General contractors assume the bulk of the responsibility for the project, since they determine its cost, completion dates, assess possible risks and select subcontractors. Conducting a construction business of such a scale requires its own fleet of various special equipment, material and technical base and a staff of experienced specialists;
- Subcontractors specialize in performing a narrow range of specific works and work under a contract with a general contractor. On the question of how to develop a construction business from scratch, start-up entrepreneurs should pay attention to this particular area of activity: to create such an enterprise, it is enough to form a small team and purchase equipment;
- Suppliers undertake to provide construction with materials of the required nomenclature and quality in the required volumes.
Choice of direction
- Civil engineering. The direction includes the construction of multi-apartment and private residential buildings, cottages, office buildings, hotels, garages, train stations, shopping and entertainment complexes;
- Industrial construction. This area includes the construction of industrial buildings, workshops, warehouses, factory buildings;
- Agricultural construction. This type of activity involves the construction and equipment of poultry farms, livestock and greenhouse complexes, vegetable stores, elevators;
- Road construction. This business includes the construction and reconstruction of transport infrastructure objects - roads and railways, bridges, tunnels, metro lines.
How to start a construction business from scratch if the amount of start-up capital is limited? In this case, the most accessible direction may be to carry out repair and finishing work in apartments and commercial premises - an enterprise with such specialization does not need either heavy construction equipment, or a separate office, or a large staff of employees. Business ideas in the construction industry with minimal investment include:
- Construction of private houses and prefabricated buildings;
- Construction of garages, baths, gazebos and other outbuildings;
- Redevelopment, repair and decoration apartments or private houses;
- Facade works, building insulation;
- Electrical work;
- Installation of ventilation, heating and water supply systems;
- Installation of stretch ceilings;
- Painting, decorative plastering;
- Laying all types of floor coverings;
- Laying ceramic and granite tiles;
- Installation of plasterboard structures.
Financial model of a construction company
Brief Investment Memorandum
Small construction business, as well as large, is a profitable business in terms of payback and growth prospects. Such a small business includes the construction of country cottages. Given the increased popularity of private houses, the company can quickly recoup the money invested. The payback period is 6 months.
Starting a company will require qualified employees. The staff will be 29 people. It is also necessary to rent an office space. The minimum office area is 100 m2.
The average cost of building 1 m2 of a cottage is 15,000 rubles. Taking into account the seasonality of the business, which falls on the summer period, the company will be able to conclude, on average, 12 contracts for the construction of cottages. The average size of a house is 250 m2. Thus, the company will build 30,000 m2 in a year. Given the high demand, this indicator can be increased by hiring additional staff.
The amount of initial investment - 2,482,000 rubles.
Average monthly profit - 2,045,000 rubles.
The break-even point reaches the third month
Payback period - 6 months
Description of business, product or service
Currently, due to overpopulation in the city and the desire of people to live in the countryside, more and more people are thinking about building their own country house. This is evidenced by the downward trend in the number of purchased apartments in multi-storey buildings. In this regard, the need for construction companies of suburban real estate is constantly increasing. The market volume is growing, which opens up new opportunities for new companies.
The main factor influencing the success of companies in this business is the provision of turnkey services to the client, including design, construction, renovation, and finishing of premises. It is also necessary to add additional services: designer and technical supervision, land acquisition. The main activity is the construction of cottages made of bricks, wood and other materials. When opening a company, you need to pay attention to the development of software for fast communications with the client and suppliers. It is important to comply with reporting to the client, to complete all stages of work on time and without increasing estimates.
Step-by-step instructions for starting a construction company
List of documents
To open an LLC, you need to take into account several points: choose a founder, hire a director and have a minimum authorized fund of 10 thousand rubles. You open an individual entrepreneur or LLC and a bank account - and you're done.
The next stage is the collection of documents that you will need to conduct your specific construction activities. For example, for certain types of work involving electricity, gas or welding, there are specific licenses and requirements for installers, engineers and foremen.
If you are going to be engaged in a large construction business, for example, design, repair or reconstruction, you cannot do without an SRO - a certificate of membership in a self-regulatory organization.
All these steps depend on a number of factors: for some types of work on construction sites, you will definitely need an SRO, others will not let you in without additional licenses, such as an EMERCOM license, an electricity license, a welding license, etc. etc.
Selecting a location
As I have already mentioned, there are many areas of activity in construction, so it is almost impossible to describe the standard model of entrepreneurial behavior. Let's consider ordering equipment using the example of installing plastic windows.
How can a small business in construction and decoration grow and break through the "glass ceiling"
In this article we will figure out what to do when you feel: the business has hit the ceiling and something needs to be changed so that it continues to develop.
I will say right away: if you are a builder or a finisher, then there is no point in worrying about moving to the next level until your net profit is higher than 400 thousand rubles per month (or about $ 6,000 at the rate at the time of writing this articles).
It's not that you don't have to think about it at all, it's just that you have not yet reached the full potential at your level.
And in this case, you need to work to improve the efficiency of what is:
- refine the financial model to earn more;
- build processes to spend less;
- optimize the sales system to sign more contracts on existing applications;
- connect new attraction channels and revamp old ones in order to receive more applications.
We do all this in the program "Super profitable business in construction and finishing". There you will find all the necessary tools to reach 400K rubles per month. Considering the reasonable cost of the program, this will be the most profitable investment in the development of your business.
But what to do when everything that can be configured is already configured, and there is a stable 400 thousand rubles per month?
You need to change the structure and yourself, as the basis of your business.
This is what this article is about.
Someone said a great phrase: the 21st century is not the age of brilliant singles, but the age of brilliant teams.
If you understand that "the business has hit the ceiling," then, most likely, you will not be able to pull everything even further on just one yourself.