Starting a construction company as a general contractor in Canada or the USA

Embarking on the journey of starting a construction company as a general contractor in Canada or the USA is an exciting endeavor that comes with its own set of challenges and opportunities.

50% of construction companies go out of business within 5 years. The main challenges that the average general contractor faces are finding leads, managing effectively their profitability, and finding qualified & loyal construction workers. 

This comprehensive guide will walk you through the essential steps to establish and grow your construction business successfully, while also introducing you to valuable resources to maximize your probability of success.

Conduct a thorough market research

Before diving into the world of construction business, conduct thorough market research in your chosen region. If you decide to work in the suburbs or downtown, your audience will not be the same, the type of properties will not be the same and the licensing & permitting process can vary. Understand the local demand for construction services, the competitive landscape, and the specific regulations and permits required. Depending on your location certain types of construction projects may be more popular than others. You will also notice that the profit you can generate will differ depending on the type of projects you decide to undertake. The more focused you are, the better you can optimize your cost structure and expertise to maximize your profits.

Define a company vision

Craft a detailed business plan that outlines your company's goals, target market, services, pricing strategy, and growth projections. 

It’s helpful to be clear with yourself what you’d like to achieve with your construction business within 5 to 10 years. Any successful construction company takes time to build. You want to know if you’d like to build a small, medium or large construction company: do you want to have one, two or three construction crews? Do you want to focus on residential or commercial projects? Do you want to focus on new constructions or mainly focus on smaller projects like bathrooms, kitchens?

Compliance and Licensing

Familiarize yourself with the legal requirements for establishing a construction company in your chosen location. This includes obtaining the necessary licenses, permits, insurance, and adhering to safety regulations.

Build a strong and loyal team

Assemble a team of skilled construction professionals, including subcontractors and construction workers, who align with your company's values and goals. 

Start with 2 employees to form one crew for the first 6-12 months until you can build solid trust. Do not try to grow too fast until your internal operations are fine-tuned. Construction usually has a high turnover rate until you can find high quality employees. 

In regards to finding solid subcontractors, you will likely have to network and it takes time to build tight relationships with excellent subcontractors. You can always start to find plumbers and electricians by researching on Google.

Read more about how you can build a strong and loyal team

Effective Marketing and Lead Generation

Develop a robust marketing strategy that incorporates both online and offline tactics. We created a guide if you’d like to dive deeper into how to acquire customers for your construction company?

In summary you’ll have to create a compelling website, use social media platforms, explore paid advertising or lead-generation platforms in order to attract potential clients. Consider joining Billdr Pro's marketplace to access a pool of leads actively seeking construction services.

Use a Construction Management Software

Find and implement a construction management software early on, like the one offered by Billdr Pro, to streamline project planning, scheduling, communication, and documentation. 

A construction management software will significantly increase your efficiency and organization, leading to increased profitability, higher employee satisfaction and also improved client satisfaction.

By using a construction management software you will also increase your sales performance by producing detailed and professional quotes faster. You’ll look more professional with customers and you’ll also reduce errors that could be costly for your construction company.

In 2023, you’re at a disadvantage compared to your competition if you do not use a construction management software to simplify your life and improve your operations.

Read more on why you should use a construction management software for your general contractor business.

Prioritize profitability at all times

Effective financial management is crucial for the success of your construction company. Monitor expenses, track project costs, and continuously assess your pricing strategy to ensure healthy profit margins. Again use a construction management software to keep a close pulse on your profitability. 

As a rule of thumb, when you create quotes you want to allocate 20-30% profit margin and 10% administrative margin on your construction labour costs in order to be profitable. Usually, general contractors underestimate their time spent doing administrative work: you want to make sure you are paid for the time you spend working outside of the construction which is necessary to ensure you coordinate all your employees and subcontractors well on a weekly basis.

With experience, you will identify the types of renovation projects that are more profitable than others. You will also learn to avoid doing projects at low prices because they could simply be too risky.

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