Let’s dive into the nitty gritty of how much cash you’ll need to get up and running. Spoiler alert – it’s not cheap! But with proper planning and elbow grease, you can make it work.
Construction is a solid business if you have the skills, drive, and yes, startup funding. But have no fear – we’ll explore creative ways to launch on a budget.
Below I’ll walk you through:
- All the costs needed for launch
- Ongoing expenses to operate
- How to budget and fund your dream
- Tips to save money at every turn
Let’s get to the good stuff!
One-time startup costs to open for business
Starting a construction company takes significant capital upfront. These are costs you pay just once to set up your business.
Big ticket items include physical assets like equipment, space, tools, and vehicles. You’ll also need to cover licensing, insurance, marketing expenses and more.
Add it all up your one-time costs will likely fall between $50,000 to $500,000. Factors like company size, location, and type of construction influence costs. Let’s explore the startup checklist:
Form your business legally
First things first – make your company legit on paper! Here’s what you’ll need:
LLC formation and licensing
Creating your LLC will cost $50 to $500 depending on your state. Also budget $50 to $700 for general business licenses required in your area.
Insurance
Don’t open the doors without insurance! For starters you’ll need:
- General liability insurance to cover property damage and bodily injuries. Budget $500 to $2,000 annually.
- Workers’ compensation if you have employees. Usually a minimum of $1,000 per year.
Rates vary based on payroll size, industry risk, and your history. For specifics, talk to an insurance agent for quotes.
Lawyer fees
Having a lawyer on call is smart for $1,000 to $1,500. They can review contracts and advise on legal issues. Pay per hour as-needed or a retainer.
Buy equipment and tools
A construction company needs gear to get the job done. New or used, these assets are pricey but crucial.
Vehicles
A pickup truck or van starts around $25,000. Go for rugged, high-capacity vehicles that can haul equipment.
Heavy machinery
Think loaders, excavators, bulldozers, backhoes, cranes, and graders. New machinery costs $50,000 to $500,000+. Consider buying used or renting.
Hand tools
Equip your crew with must-haves like hammers, drills, saws, ladders, scaffolding etc. Quality tools run $500 to $5,000 for a starter set.
Office furnishings
To outfit your office and yard, allocate $5,000 to $10,000 for desks, chairs, filing cabinets, shelving, and storage. Shop used if possible.
Setup your office space
Every construction company needs an office! Here are the options:
Buy or lease space
Owning is a major investment, while leasing offers flexibility. Pay $1,000 to $5,000 monthly for a basic space depending on location.
Renovations
Expect to pay $5,000 to $25,000 to build out your office to suit your needs.
Factor in ongoing costs like rent, utilities, and maintenance too. We’ll break this down more later.
Invest in marketing and branding
It’s time to spread the word that you’re open for business!
Website
A professional site is a must. For design, development, and hosting expect to pay $500 to $3,000+. Don’t DIY this or your site will look amateur.
Logo and branding
Have a designer create your logo, style guide, and other branding assets. Budget $500 to $2,000.
Signage
Invest in yard and job site signs, vehicle wraps, decals etc. It starts around $75 per vehicle and $1,000+ for large signs.
Print materials
Splurge on sleek business cards, stationery, flyers and prints. Plan $500 to $1,500 for high-quality collateral.
Lock in your tech stack
Construction relies on project management, scheduling, accounting and more.
For your software needs, budget $500 to $3,000 upfront, with ongoing fees. Must-haves:
- Accounting for invoicing and tracking financials
- Project management to schedule jobs and workflows
- Fleet tracking for vehicles and equipment
- CRM to track leads, sales, and clients
Other popular options are cloud storage, CAD programs, and email marketing software.
Recurring expenses to account for
Congrats, your doors are officially open! Now let’s talk about monthly recurring costs you’ll face to keep operations running smoothly.
Budget a minimum of $10,000 to $30,000 per month for a small operation. Recurring costs may include:
Employee overhead
Your crew is the backbone of your construction company. Be ready to invest in:
Competitive salaries
Pay your people what they’re worth! Construction workers earn $15 to $50 per hour based on skills and experience. Salaried managers can make up to $100,000 annually.
Benefits
Stand out by providing benefits like health insurance, retirement plans, and paid time off.
Payroll fees
Payroll processing and tax compliance will cost you $150 to $250 per month.
Training
Invest in safety and skills training. Budget $100 to $500 monthly.
Office and facilities
Keep your business hub fully operational by covering:
Rent + utilities
For office/yard space expect to pay $1,000 to $5,000+ monthly. Don’t forget electricity, water, internet etc.
Ongoing maintenance
Budget for renovations, repairs, cleaning services, and landscaping – $500 to $2,000 monthly.
Office supplies
Allocate $100 to $250 monthly for coffee, printing, pens and paper. It adds up!
Insurance
In a high-risk industry, insurance is mandatory:
Liability premiums
Pay your annual commercial policy premium in monthly installments. Budget $250 to $750 on average.
Vehicle insurance
Insuring your fleet will run $150 to $500 per vehicle per month.
Professional services
You’ll lean on other pros to run smoothly:
Lawyer
An hourly lawyer can cost $200 to $500 monthly.
Accountant
Pay around $200 to $500 per month for bookkeeping and tax prep. Worth the investment!
Inventory and supplies
The cost of goods sold adds up:
Project materials
Have budgeted bulk purchases of lumber, concrete, drywall, wiring etc? You’ll easily spend $10,000 to $50,000 monthly.
Storage space
If needed, allocate $500 to $2,000 for inventory storage rental each month.
Marketing expenses
Consistently market to generate leads and sales:
Advertising
Test different channels – search, social, print, trade publications. Budget $500 to $1,500 monthly.
Website hosting/SEO
Maintaining your website will cost around $100 to $250 per month.
Vehicle costs
Fuel and maintenance keeps your trucks and machinery rolling:
- Gas/diesel: $500 to $2,000 monthly
- Repairs: $250 to $750 monthly
How to fund your construction startup
Let’s look at smart ways to fund your new venture so you can cover all these costs and start strong.
Calculate your total startup costs
First, tally up all one-time and monthly expenses. Pad extra for unexpected costs.
A good rule of thumb is to have 6 months of operating costs ready so you can withstand a slow period. Don’t take on projects until your war chest is stocked.
Next, explore funding sources to cover costs before opening the doors.
Tap your personal savings
Funds you already have are the cheapest option.
Can you tap:
- Personal savings? Check accounts.
- Home equity line of credit? Useful if you have equity.
- 401k loan? Allows you to borrow against your balance.
- Credit cards? OK for small initial costs only.
Aim to cough up 20% to 40% from personal funds if possible. This shows investors you’re committed.
Seek business financing
If you need to finance your startup, options include:
- Small Business Administration (SBA) loans offer favorable long-term financing for qualified applicants. Max loan is $5 million.
- Bank/credit union loans provide financing for equipment, vehicles, lines of credit, and more. Shop small banks that focus on local biz.
- Equipment financing allows you to finance machinery over its usable life rather than paying full price upfront. Payment plans help cash flow.
- Factoring has investors buy your accounts receivables to inject cash flow. Fees apply.
- Business credit cards are an easy financing option for small and recurring expenses. Limit this route.
Aim to finance 50% from business financing. Shop rates to find the most competitive terms.
Seek investors or partners
For large capital needs, explore:
- Angel investors will exchange startup cash for equity in your company. Create a pitch deck to sell them on your idea’s profit potential.
- Venture capitalists also provide capital in exchange for equity. VCs focus on growth potential more than angels.
- Private investors include high net-worth individuals willing to invest in your vision. Tap your network to connect with potential backers.
- Strategic partners are existing construction firms that may invest in your startup or form joint ventures.
Having the right partners and investors on board can make all the difference, providing capital, industry expertise, and valuable connections.
Reduce your startup costs wherever possible
Looking for ways to trim that startup budget? Here are proven tips to launch on a bootstrap budget:
Buy used vehicles and equipment
- Scout auctions and classifieds for discounted deals on equipment, machinery and company vehicles. You can often find quality gear at 40% to 60% less than new.
Start from a home office
- Avoid expensive commercial space by setting up a home office if allowed by zoning laws. Add a trailer or shed in your yard for storage.
Use freelancers or part-timers
- Instead of hiring full-time workers with salaries and benefits right away, tap freelancers or part-timers to help on a project basis. They offer flexibility as you ramp up. Post jobs on freelance sites to connect with specialized talent in your area.
Build your website on Squarespace
- Skip pricey web developers by choosing an easy drag-and-drop site builder like Squarespace. For as little as $12 per month you can build a polished, professional website to market your company.
Lean on free software
- Reduce software costs by trying free options first. Examples are waving Square Appointments for scheduling, HoneyBook for proposals, TSheets for time tracking, Wave for accounting and invoicing. Scale up as needed.
Rent equipment
- Avoid huge equipment purchases by renting machinery as-needed for jobs. There are many equipment rental outfits offering flexible rates. This prevents assets from sitting idle between jobs.
Partner with established firms
- Reduce risk by partnering with larger general contractors to bid on bigger commercial projects early on. Offer to come on as a specialty subcontractor in areas like masonry, carpentry, electrical etc. and share the profit.
Start as a subcontractor
- Before taking on large general contractor jobs, gain experience as a subcontractor focused on specific trades. This requires less licensing and slimmed down tool/equipment needs to get started.
The final bill – are you ready?
One-time startup costs range from $50,000 to $500,000 covering physical assets, workspace, tools, marketing, tech and all legalities.
Then budget for monthly operating expenses between $10,000 to $30,000 including payroll, insurance, rent, inventory, and more recurring costs.
Secure at least 6 months of operating capital before taking the leap. Look for ways to trim costs like buying used, partnering strategically, and utilizing free software.
With careful budgeting, tenacity, and passion for building, you can startup and scale your construction company. Here’s to bringing your contracting dreams to life!
Now grab your hard hat – time to start constructing your empire.
