Discover How to Start a Construction Business

Start your own construction business in the UK with our comprehensive guide. Learn about market research, business planning, funding, legal requirements, marketing strategies, and more.

If you have been considering starting a construction business, you are probably wondering how to get started. In this guide, we walk through the steps of how to start your own construction company, from developing a marketing strategy and construction business plan, to setting up your finances and registering the firm.

So read on, take notes and you'll be well on your way to creating a successful construction business in no time.

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Why start your own construction company?

Skilled construction professionals who find their niche have the potential to run a growing and profitable business. Homes represent the biggest investment for most people and so homeowners are highly motivated to make them as comfortable, energy-efficient and on-trend as possible. With the encouragement of DIY shows and social media, keen renovators are often encouraged to take on many projects themselves. However, most homeowners lack the time and aptitude to unravel the more complex projects and need the help of pros.

According to data from Confused.com home insurance, a third (32%) of UK homeowners plan to take on major home renovation projects over the next year. But before you take the plunge, consider whether you are ready to take on the challenge of starting your own business. Besides having the experience, skills and tools needed to take on your own construction company, you will need to know how to run a company.

The advantages of owning your own construction business are that you will be able to set your own schedule, help customers increase the value of their homes, and enter a growing market. However, running a business is hard work, and running a construction business is even harder considering the physical labour involved. Besides being self-starters and knowledgeable about the construction business, the most successful construction company owners have strong communication skills to help them successfully deal with subcontractors and clients, the bread and butter of any construction company.

How much does it cost to start a construction company?

The cost of starting your construction company will depend on what equipment you already have available as well as the size of the company you plan to start.

Depending on the scale of your operation, starting a construction company could cost between £5,000 to £50,000. If you already have the tools and vehicle, your overall startup costs will be lower, to cover setting up a name, printing business cards, getting insurance, and creating a website.

If you need to buy tools and a vehicle, even if you are starting a small construction company, the startup costs will be much higher. And, if you decide to open a physical office outside of your home, figure out the cost of rent, utilities and computer equipment.

How to start a construction company?

With the cost considerations and length of time it takes to start a construction company in mind, let’s walk through each step of starting a construction company:

Step 1: Conduct Market Research

Knowing the construction landscape and identifying the other construction companies in your area will help your business be more successful and help you nail down your speciality. Do research to determine who your potential clients are, as well as your competitors. This will help you know how to reach your customers and choose the services to offer.

Research the Competition: What type of construction services are other similar companies in the region offering? Look into the other businesses in the area and see if there is a gap in the market that your company can fill.
Determine Your Ideal Client: Conduct research to identify the type of client you are seeking and who'd be happy to work with.
Assess the Potential Demand for Construction Services: Does your ideal client match up with the demographics of the community where you plan to open your business? If not, determine what type of services are needed there or find an area where your services might be more in demand.
Develop a Marketing Strategy: Once you've identified your ideal clients, research where they live, work and shop so you can reach your target market on the relevant social media channels.

Step 2: Choose Your Construction Company's Name & Niche

Armed with your marketing research and marketing strategy, it’s time to pick your speciality and business name for your new construction company:

Decide Your Niche Perhaps you may decide to specialise in loft conversions, kitchen extensions or bathroom redesigns. Maybe you want to be more of a generalist covering all aspects of residential renovations.
What Services Will You Offer This may include kitchen installation, tiling, plumbing, decorating, carpentry and more. Narrowing down your products will help you be able to communicate the type of work you do in marketing materials and to clients.
Pick a Name The name of your business should convey your services and mission so the clients know immediately that they are contacting the right company for their project.

Here are some things to consider when deciding on a name:

Brainstorm Make a list of many names and narrow it down later until you find the one that fits best with your company's services and ethos.
Simplicity is key Choose a name that is easy to pronounce and spell. The name should be relevant to the services you offer so keep it simple, but catchy. The best construction company names are not overly complicated. You want your business name to be easily understood and recognisable.
Use keywords Pick a name that includes keywords like 'construction' or 'renovation'.
Don’t paint yourself in a corner Avoid a business name that is geographically specific so that you allow for future expansion in both region and services.
Check for Patents and Trademarks Run your top construction company's name candidates through a search on the UK's Intellectual Property Office website to make sure they are available, and conduct a domain search to make sure they are not already taken.

Step 3: Develop Your Construction Company's Business Plan

In the rush to start a new construction firm, it is tempting to hurry your construction company business plan or skip it completely. But having a map to follow will lead to a more successful business. Here are the typical components of a business plan:

Executive Summary A short recap of what will be included in the plan.
Company Description This details the name of your company, size and type of services it will offer.
Target Market A detailed business plan includes a description of the type of clients your business is seeking to serve as well as their geographic location, and other demographics.
Market Analysis What did you discover during your market research and why did you decide on this particular clientele and product offerings? This section provides those details.
Marketing & Sales Strategies Sketch out how you plan to reach your target audience and start filling your sales pipeline with leads.
Financial Projections Detail the revenue streams and how your company plans to make a profit. Also, include in this section the percentage profit anticipated in the first year of business, and how it will grow five years out in the future.

Step 4: Choose The Entity For Your New Construction Company

To protect yourself and your business, you will need to legally form your business before you open your doors. That means picking your business structure and forming a business entity. The type of structure you pick can also impact your ability to get business loans and seek investors, if that is a route you are considering. Here are the most common ways construction firms are structured:

Sole Trader A business owner who chooses this structure is in the business alone and has less protection from putting their personal finances at risk in cases of liability.
Limited Company Registering as a limited company may have tax and legal benefits, For example, it enables the owner to separate the company's financial affairs from their own, protecting their personal assets, such as their home, should anything happen to the business. A limited company must be registered with HM Revenue & Customs for corporation tax purposes and as a separate legal entity with the Companies House.

Learn more with Our Comprehensive Guide to Setting Up a Limited Company.

Step 5: Register for the Construction Industry Scheme

In the UK it is a legal requirement for construction firms to register for the Construction Industry Scheme (CIS) under which contractors are required to deduct tax from the payments made to self-employed subcontractors for their construction work. This payment handling system was ultimately set up to stop tax avoidance and make it easier for self-employed subcontractors to pay their income tax on time.
Any contractors not complying can lead to penalties and fines.
To register for the CIS you will need to submit:

the business name
your National Insurance number
the company's unique taxpayer reference number
your value-added tax (VAT) identification number (if applicable).

Step 6. Consider other legal requirements

Most new businesses will have various legal requirements to adhere to, and for construction companies, health and safety regulations are the utmost priority to ensure the safety of workers and the public. Complying with these regulations is a legal obligation and corporate responsibility, and failure can result in fines and legal action.
Legal requirements are subject to change, so stay up to date to ensure your own company complies with the minimum requirements.
It is also a legal requirement for anyone working in the construction industry to have a Construction Skills Certificate Scheme (CSCS) Card. Construction companies should ensure all subcontractors carry one.

Step 7: Get Building Company Insurance

Protect yourself from financial risks by purchasing insurance for your construction company. The most common type is Public or General Liability Insurance, which covers you if a third party is injured or a property is damaged as a result of your professional services. Construction companies will also benefit from Employers' Liability to cover against long-term employee sickness or if an employee is injured while working for you. Tools insurance is also a worthwhile investment to cover the loss of any building materials and construction tools, as is property insurance, which protects any offices from theft or natural disasters, and vehicle insurance, again protecting any construction vehicles from theft or damage. Check to find out what type of insurance you will need before you open your construction business.

Step 8: Set Up Your Construction Company's Finances

The bottom line of your new construction company is assuring that it will be profitable. That means setting up your finances, determining how you will fund the business, deciding how much you will charge and setting up your accounting processes. Here are some steps to take:

Secure Funding If you are lucky enough to have money saved for your business, you may decide to self-fund your business. However, there are many other ways to secure capital to start a construction business without money. These include bank loans, government-backed start-up loans, or a small business loan. You may also decide to tap friends and family who are willing to invest in you, or use crowdfunding to kick-start your business.
Set Up Accounts It is crucial to separate your personal and business finances to avoid confusion and make it easier to file your taxes. Check out the various rates and services offered by banks to decide which one will work best for your business. Also, consider what type of credit card you will use for your purchases.
Accounting How will you handle the accounting of your business? There are various software services available as well as professional accountants who can help you along the way. Consider how you will track your expenses, create a budget and assure that you have all the documentation necessary to file your tax returns when the time comes.
Pricing Before you open your doors, determine how much you will charge for your services. Research competitive rates of local construction companies, and figure out how much you will need to price your services in order to cover expenses and make a profit.

Learn More These resources can help you with tips on how to overcome the challenges of getting your financing ducks in a row:

Step 9: Factor in the cost of tools and equipment

As well as investing in the essential tools, such as ladders, drills, different types of saws and hammers, and basic tools like screwdrivers, you will also have to decide whether you are going to purchase or rent equipment for your construction company. Some construction projects require complex machinery, such as cranes and bulldozers, which can be very expensive. As all construction jobs are different, it may be a better business plan to rent the equipment as and when it is needed. You will also need to be able to transport your equipment, so look into the cost of buying or leasing vans or trucks to assess what will be more financially beneficial.

Step 10: Build a Strong Construction Brand

The old adage about having a lift pitch still runs true. Successful pros are able to articulate in a few sentences the values of their construction company and the services it offers.

Your brand conveys what your business stands for so take some time to list your values, goals and services. Then, use the information to write your lift pitch and create the public-facing tone and message of your business. Do you want a logo? Is there a one-line catchphrase that summarises your company that you want to add to your website and other promotional materials?

For more tips, check out 9 Construction PR Tips Every Pro Should Know

Step 11: Market Your Construction Services

Now that you have created and refined your brand, it is time to get the word out about your new construction business.

Here are just a few ways to let people know about your construction venture:

Use Social Media The great thing about social media marketing is that it is essentially free, and where your potential customers are. Start by picking just one or two social media platforms, and post regularly. Photographs of projects & team members are great fodder for posts.
Create a Website Having an online presence is no longer just an option these days. It is a prerequisite to success. While word of mouth is still strong in the construction industry, searching the web is where homeowners turn when they are seeking a pro. A quality website with professional-looking photos, and information about your mission, services and team builds brand awareness and credibility.
Networking Attend events, conferences and join professional industry organisations to make connections with your community and others in the construction industry.
Leverage Client Reviews There is nothing like a proven track record to turn the heads of new clients. Make it easy for your customers to deliver five-star reviews and consider starting a referral program. Post the testimonials on social media and make them prominent on your business website.

Marketing does not have to be a mystery. Learn more about how to fill your sales pipeline with a steady stream of clients:

Other tips for starting a construction company

As you advance in your journey of starting your first construction business, here are a few other reminders to help you be successful:

Follow up on Leads Eventually, you will be able to be more particular about which clients to take on, but at the start, build a strong reputation in the construction industry by checking out every lead.
Build a Strong Online Presence When homeowners search online for builders, greet them with a website that makes them want to learn more.
Get Estimating Right Accurate estimates are one of the most important ways to assure you make a profit and avoid costly change orders down the road. Invest in the time and resources to perfect your proposal-making skills.
Prioritise Building a Strong Team As you hire employees, focus on creating a skilled team that reflects your brand, and values. Investing in training can help assure that everyone is on the same page.
Choose a Construction Business Software Technology can make your business life easier by helping you organise and manage leads, speed up your business processes and assure that you have the latest high tech tools that clients expect.

Seek out construction management software that is easy to use, includes powerful takeoff and estimating tools, makes it easy to collaborate with clients, is mobile-friendly so you can work from anywhere. Make sure it features tools like a 3D floor planner to impress clients with your presentations. Sign up for a free trial of Houzz Pro to explore our construction management software.

Conclusion

Yes, starting a construction business is not as simple as picking a name and opening your doors. But with careful planning and determination, you can build a business that will grow and thrive for years to come. You will be well along the way if you do your homework, create a solid business plan, learn the legal requirements and invest in marketing and branding. Best of luck!

Learn more with How to Grow a Construction Company: 21 Expert Tips

Houzz Pro is the all-in-one tool for marketing, project and client management built specifically for renovation, build, and design professionals.

How to Start a Construction Business