9 Steps for Building a Successful Construction Business

How to build a successful construction business

While the construction industry forecast is bright and shows no signs of slowing down, building a successful construction business still requires careful planning and ongoing effort. Following these steps, strategies and best practices can help you establish a strong presence in the market, build customer loyalty and stay legally protected.

1. Define your services.

“Construction” is a broad field that covers a wide range of specialties, such as framing and drywall, roofing, siding, windows and more. To build a strong foundation for your business, start by clearly defining the services you offer. Consider your skill set, the equipment you have on hand (or can access) and whether specific services are in high demand in your area.

Even if you plan to operate as a general contractor that works on multiple types of projects, it can be helpful to define a primary service offering, like window installation or roof repair. Carving out a niche can make your company the go-to choice when clients in your local market need that specific service.

“The most important step is knowing what you’re going to be great at — and what you’re not going to touch,” advised Whitney Hill, CEO and co-founder of SnapADU, a design-build general contracting firm that focuses on accessory dwelling units (ADUs). “It’s far easier to succeed by getting very good in a niche than by trying to go broad out of the gate.”

Bar Zakheim, CEO of Better Place Design & Build, agreed, adding that if you don’t hone your marketing to specific types of projects, you won’t be able to stand out.

“Get good at one type of project, make your name on it, then expand your offerings,” said Zakheim.

2. Develop a business plan.

Before starting a business in any industry, including construction, you must develop a solid business plan that outlines your services, costs and path to profitable growth. Your business plan doesn’t need to be overly complex, but it should clearly define your goals, target market, pricing strategy and projected expenses. 

As you put together your business plan, take time to research your local market and check out the competition. What are their rates? What kinds of services do they offer? The more you know, the easier it will be to shape your offerings and set realistic goals. A clear view of local demand and future opportunities can give your business a stronger foundation for growth.

3. Understand your costs and secure funding.

Understanding your costs is critical in construction, where expenses like equipment, materials, permits, insurance and labor can quickly add up. Michael Feazel, CEO of Roof Maxx, noted that managing cash flow is one of the biggest early-stage hurdles for construction companies.

“Construction can be more challenging due to high start-up costs and working capital [needs],” Feazel explained. “Staying lean early on and carefully managing each project’s financials can help avoid getting in over your head.”

Chad Prinkey, CEO of construction consulting firm Well Built Construction, agreed, saying that a strong financial foundation and roadmap are key to combating financial mismanagement — one of the biggest reasons construction companies fail.

“You can’t afford to be financially illiterate in this business,” Prinkey cautioned. “Get educated on business finance, specifically on construction accounting. Running a business without this [education] will inevitably lead to cash issues and sink your business before you get started.”

Construction is a notoriously low-margin industry (about 7 percent on average for U.S. construction firms), so Prinkey advised new business owners to secure financial backing as soon as possible.

“Whether personal savings, business loans or investor support, you need capital to sustain operations before cash starts flowing,” Prinkey noted.

4. Obtain your business registration, license and permits.

Before taking on any projects, obtain a license for your construction company and ensure you’re registered to operate in the state or jurisdiction where you plan to work. While most states require general contractors to hold a license, some areas only require licenses for projects over a certain dollar amount or for specialized work like electrical or plumbing. 

Generally, the licensing process involves proving your experience, passing trade or business exams, securing insurance and perhaps a surety bond, and registering your business with the state. Chris Fallon, owner of general contracting firm Fallon Contracting, noted there may also be specialty licenses or city- or county-level licenses you’ll need to secure in addition to a general business license.

“Do your homework before you open your doors,” Fallon emphasized.

5. Choose a business insurance provider.

Business insurance is a must-have for any company, but in construction, it’s nonnegotiable. Working with heavy machinery, power tools and active job sites introduces risks to people and property that aren’t as common in other industries, so you’ll need comprehensive insurance coverage that matches the type of work you do.

At a minimum, most contractors are required to carry general liability insurance, which covers injuries, property damage and legal claims. You may also need workers’ compensation insurance, as it’s required in most states if you have employees and commercial auto insurance for company vehicles. Even with that coverage, you could still need builder’s risk insurance to protect materials and equipment on active job sites.

6. Hire and train the right people.

It can be tempting to run a solo operation to save money on labor, but trying to do everything yourself limits growth. “Building a team and creating repeatable processes is what scales a business,” Feazel stressed.

Still, the hiring process can be challenging in today’s tight labor market. “Finding enough general laborers for your projects is a constant battle,” Zakheim warned. However, once you find good employees, you’ll need to invest in employee training and comply with federal and local labor laws.

Construction companies are legally required to follow Occupational Safety and Health Administration (OSHA) standards, which cover everything from fall prevention to equipment safety. In addition to ensuring OSHA compliance, regular safety training helps reduce the risk of workplace accidents, injury-related downtime and costly fines.

According to Jennifer Wilkerson, VP of Innovation and Advancement at the construction education nonprofit NCCER, proper training — or a lack of it — affects “retention, loyalty, engagement, ability to attract new talent and company reputation.” Wilkerson also noted that with more Gen Zers (the “Toolbelt Generation”) entering the trades, contractors should expect to provide structured training pathways. “They want a clear career path with training that helps them get there.” 

If you’re starting from scratch, Wilkerson recommends first identifying what kind of training your team needs. They could need craft skills, field leadership or apprenticeship programs. Then you decide whether you’ll build training internally or seek help from outside trade education organizations or local community colleges.

7. Establish systems to stay organized and on track.

Keep your business organized with clear systems for operational tasks like bookkeeping, invoicing and bidding. This will help you stick to your budget and get paid for your work promptly — critical in an industry with high overhead costs and long project timelines.

“Realizing $500,000 of contract value over 12 months is very different from realizing it over 18 months,” Hill explained. “If your overhead doesn’t scale with your delivery, that can sink your business.”

It’s also wise to track how much time and energy you dedicate to your services. This will help you avoid spreading yourself too thin or taking on too many clients or tasks at once. It might seem like more customers are always better, but that’s only true if it doesn’t require you to sacrifice the dedication you can give to each one.

8. Market your construction business.

While acquiring clients through word-of-mouth advertising is great, developing a robust local marketing strategy will grow your business even further. 

Christopher DeFeo, owner and president of DeFeo Materials, an aggregate materials supplier for construction companies, advised starting by identifying your ideal customer. Whether that’s residential homeowners, commercial property managers or developers, you should craft messaging that clearly shows what you do and why they should work with you.

“Branding is crucial in pointing out what your company specializes in,” DeFeo explained. “Clarify through analogies and visual charts to show the differences.”

Consistency is key, whether it’s through your website, social media marketing, local advertising or word-of-mouth. A professional logo, clean job site photos and clear, benefit-driven messaging all help reinforce your credibility.

Marketing may not feel like a top priority in the early days, but it’s one of the best long-term investments you can make. “It will take time for your reputation to grow, so don’t give up,” DeFeo added.

9. Prioritize service as your business grows.

Even as construction company owners hire more employees and take on more jobs, staying involved in customer service is crucial. Maintaining that involvement shows your dedication to your clients and team and helps ensure your business continues to run smoothly.

Construction can be a confusing process, so your clients may have questions and need step-by-step progress updates. The more time you set aside to listen to and alleviate their concerns, the more comfortable they’ll feel hiring you in the future or recommending you to a friend. This level of support will go a long way toward generating customer loyalty, earning repeat business and gaining valuable referrals. 

“Construction is a service industry, and providing excellent service will separate you from the pack without additional costs,” Prinkey emphasized.

The business tools needed to run a construction company

Industry-specific tools are necessary for effective and efficient construction and customer communication processes. Here are some essential platforms and technologies that can help improve your efficiency and productivity, both on the job and behind the scenes.

Construction estimating software

Estimating the cost of labor and materials — plus factoring in your profit — is a crucial element of your construction business. If your price is too high, you won’t get much business. If it’s too low, you’ll lose money or end up revising estimates frequently, leading to poor customer satisfaction.

Construction estimating tools provide accurate, comprehensive estimates you can modify if material prices change or a project’s scope shifts. The best construction estimating software includes modules for scheduling, client communication, invoicing and project management in addition to price estimation. 

Construction POS systems

Point-of-sale (POS) systems are generally associated with retailers. However, construction POS systems allow you to accept customer payments via smartphones and tablets while providing robust payment and customer tracking features. 

Many construction POS systems help track inventory so you can reorder efficiently and avoid project delays. They can also track business metrics like sales and profitability and assist with scheduling. If you have subcontractors, you can also track their time and schedules.

Construction payment processing tools

All successful businesses must be able to receive and process payments promptly. Construction projects typically involve several large periodic payments. Timely payments help ensure you can order materials and keep the next phase of construction moving forward. 

While you might receive many payments by check, construction companies should accept credit cards and other payment forms. Accepting multiple payment methods can boost customer convenience and payment efficiency.  

Smart helmets

Safety is a significant issue on construction job sites, and it always pays to protect your workers, subcontractors and anyone else visiting the site. Smart helmets are a high-tech way to improve safety. These helmets are hard hats with sophisticated tools built in, including sensors, tracking tools and augmented reality. 

Smart helmets can warn wearers of potentially dangerous conditions or alert team members if help is needed. They can monitor workers’ health in real time to avoid serious accidents. The augmented reality feature helps with site planning and provides a visual overlay without the need to carry around site plans or blueprints, allowing workers to keep their hands free for balance and stability.

Virtual reality 

While architects and engineers may be used to using 2D blueprints and renderings to visualize completed projects, clients often find this more challenging. Imagine being able to virtually walk clients through what their new home or office will look like. Virtual reality in construction is still in the early stages, but it’s poised to become a significant competitive advantage and game-changer for the industry. 

In addition to using virtual reality to improve client interaction and sales, construction firms can use it for training, reducing labor costs and improving efficiency.

Jennifer Dublino contributed to this article.