Friday, July 19, 2024

How to start your own construction company

Whether you’re a builder or bricklayer, no day is the same in the construction sector, and few things are as satisfying as the moment you’ve finally finished a big job. If you’re particularly passionate about your livelihood, you may well have thought about starting your own company. Total control over your work life is arguably appealing, but exactly how do you make the jump from being an employee to becoming your own boss? You may think it’s a long, complicated process, but it really only takes following these five steps to call yourself a construction business owner.

Write a business plan

Launching a construction company isn’t something you do on a whim, so it’s vital to draw up a business plan before you take any further steps. Not only is this integral to securing the funding you need, but a solid outline will determine how you’ll make revenue, and help you visualise your future enterprise. Market research is vital in order to gauge your idea’s potential success rate. This involves identifying and analysing your competitors, and their prices, and perhaps even speaking to local residents to see whether there’s room for another construction company in your local area. If not, consider reevaluating your concept. However, if you can see a profitable future, you’ll need to put everything in writing.

Your business plan will contain your corporate goals and procedures, including your staffing ambitions, marketing plan, overall costs, and how the company will be structured. You and your lenders will also need to know how you plan to sustain and expand your construction company, so maintenance and forecasting must be considered. This level of detail can be daunting if you’re not experienced in creating documentation, but it’s not as difficult as it may seem. There are many helpful templates and tips available online, or you could even hire a professional to help write yours.

Complete relevant registrations

How you register your construction company will depend on whether you set up as a sole trader, limited company or partnership. These different types of registration are marked by their reporting, management and accounting responsibilities. Once you’ve examined your options and made a decision, you can find details of the registration processes for each on the UK Government’s website.

You may also need to register for the Construction Industry Scheme (CIS), which works to reduce tax evasion and protects workers from false employment. Contractors cover their subcontractors’ tax and national insurance contributions by deducting money from their pay. No matter how you’ve registered your business, it’s mandatory that you sign up before hiring your first subcontractor. However, the scheme does not apply if you hire employees instead. You can register directly through HMRC, and as a registered CIS worker, you’ll have 20% rather than 30% tax deducted from your own salary.

Though not compulsory unless your annual turnover is expected to exceed £85,000, you could also register for VAT. This means you can charge this tax on the products and services you deliver, then claim it back on your business purchases. Construction work is typically charged at a standard rate of VAT, as opposed to a reduced or zero rate, but you should first consider whether it’s right for your business at all.

Apply for insurance

The construction industry can certainly be fraught with risk. You’re using dangerous tools and working in close quarters with valuable property, so it’s vital you’re protected against any accidents. What’s more, some clients may refuse to hire you unless you have sufficient coverage, so organising appropriate insurance could also help secure future work.

Though the policy you need depends on the nature of your business, there are certain covers that are essential for working in construction. For instance, public liability insurance is essential for builders as this covers them against any personal injuries or property damage resulting from their work. These unexpected incidents are a possibility when builders work in close proximity to members of the public, but this policy ensures that compensation and legal fees will always be covered by the insurance provider rather than the business. If you hire employees, then employer’s liability insurance is a legal requirement, covering you against personal injuries and property damage involving your workforce rather than third parties. Meanwhile, if you want to be covered in the event that any of your tools, materials or building works are damaged or stolen, contractors all risk insurance is specifically designed for those in your industry.

Acquire funding

Construction businesses can often save money on office space, as the vast majority of the work is off-site, and owners can complete any admin tasks from home. However, depending on the type of venture you wish to start, you may be required to purchase costly equipment before you can get started. Therefore, unless you’ve been saving up, you’ll need to find a lender to help finance your dream.

Friends and family

Your loved ones may be able to offer a helping hand, although this may be an awkward conversation and cause friction if there any issues regarding your repayments. If this is the path you choose, you must have a loan agreement drawn up, as well as a shareholder agreement if you decide to involve them more intimately in your new business.


It can be difficult for small businesses to obtain a bank loan, and there’s a wealth of detailed information you’ll need to provide to be in with a chance. This includes cash flow forecasts, evidence that you’ll be able to make regular repayments, and a good credit rating. You’ll also have to decide whether you want a secured loan, which uses valuable possessions like your house or car as collateral. These will usually have lower interest rates than unsecured loans, where banks put all their faith in you to repay your debt.

Private investors

This usually entails giving shares to the lender in return for funding. Liaising with private investors could mean involving them in the company’s strategy and management, so it’s vital you’re on board with all the terms and conditions and the expected dynamics of the relationship.

Government loans

You may be able to get the funding you need via a government initiative aimed at new businesses. One promising example comes from The Start Up Loans Company which could lend you up to £25,000 and also offer valuable advice and mentoring. The Business Finance & Support Finder tool on the GOV.UK website lists all the options available to you, allowing you to filter by sector, region, size and more.

Start work

Now you have everything you need to get your construction company off the ground, it’s time to attract customers and start working. Thanks to your detailed business plan, you will already have a  marketing strategy, know which materials and equipment to purchase, and be aware of what your company is capable of. Once the work starts coming in, you’ll need to draw up contracts outlining what is to be constructed and how. There are several types of construction contracts, and the one you choose will depend on the size and nature of the project. Then wait for all parties to sign on the dotted line, and your construction company is officially in action.

Claire James
Claire James
Claire is an accounts manager at Fire Digital UK, an online publishing and content marketing company based in the North West.

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