Before You Build: Construction Industry Concerns for Small Business Owners

Real estate offers a lot of opportunities, particularly when you have construction skills and can handle rehabs in-house. When you have those construction skills, starting a small business centered around repairs and rehabs can seem like a good way to pay the bills.

Refurbish a house

Before you decide to go into business for yourself as a builder or repairman, you need to have a handle on the challenges and problems. While construction can be a very lucrative industry, it also has its fair share of potential pitfalls. Make sure you have a plan in place to avoid the worst roadblocks you can run into.

Start with a Business Plan

Even if you have done several rehabs in the past, that doesn’t equal knowledge of how a business runs and operates. One of the biggest mistakes a lot of new constructions business make is operating without a concrete plan and set of goals. Do the research into the business side of construction before making it your primary business.

Choose a Type of Construction

Before you can really dive into a construction business, you need to know what type of business you want to run. Construction can cover everything from building new spaces from the foundation up to rehabbing existing structures. You might be more interested in doing home repairs or tackling commercial projects.

The type and scope of the construction projects you’re interested in handling will guide the direction of your business and determine some of the most likely roadblocks.

Lining Up Funding

In any business, it is all about the money. Do you have funding already lined up? The construction business often requires a considerable upfront investment. Material costs and man hours can wrack up very quickly. Learning to estimate costs ahead of time is critical to successfully completing any construction work. Once you have the cost estimate in hand, you need to line up the money.

Unless you have a substantial slush fund to work with, you’ll probably need to either find investors or go through traditional lending options. Even when you have the commitments for funds, you may run into trouble with zoning issues or other problems that can add to the costs. Sometimes, you can’t really get a clear picture of the final price of a job until you are in the middle of it. You might be forced to raise more capital before you can break ground.

Get the Paperwork in Order

Before you can start any job, you need to make sure you have all of your Is dotted and Ts crossed. You’ll need to carry insurance against injuries and property damage. Liability insurance can mean the difference between staying open and shutting down due to a single major incident.

Safety training plays a big role in accident prevent, so make sure to meet all OSHA requirements for job sites. Failure to do so might expose you to liability. Most states require you to carry insurance, so do the research and find out the minimum legal limits before agreeing to your first job.


Prepare for Cost Overruns

No matter how carefully you estimate the costs on a job, overruns happen. If a specific material you need doesn’t ship on time or the weather slows your schedule, you could pay out a lot more for man hours. Even small changes to a project can snowball into a large expense line on an invoice.

If you are working for a client, be sure to lay out all of the terms in advance and sign a binding contract. New Orleans business attorney Matthew Moeller can help you handle the legal side of operating a construction company.

If you’re working on a property investment that you own, make sure you have the option to extend your financing or obtain more, if necessary. A little preparation can go a long way toward keeping your new small business operating with positive cash flow.

Overcoming Challenges and Getting Started

Assess your own skills and understand what you need to hire out before you put up your shingle and start signing clients. Capacity is a major part of success. Know exactly what you can accomplish and how long it will take. Layout clear and reachable goals, and work to meet them.

When you know the targets you should be meeting, have the skills to get the job done and have the money lined up, you might be ready to get started. All you’ll need to do is start finding jobs and delivering top quality work.


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