Advice for making it through the challenges that come with the first year of running a new business
Opening a new construction business may be one of the most rewarding things someone can do in their life, but during the first year of operation, it will also be the most stressful. Roughly 30 percent of small businesses fail within their first two years, and less than half make it five years.
Construction is an industry with lots of potential for growth, but it’s also plagued with challenges for startup companies, including high capital requirements and other budgeting obstacles. What do new business owners need to know to lead their new construction business through its first year?
1. Don’t Neglect Marketing
Word of mouth will only take the business so far, especially as a new construction company. Don’t neglect marketing and advertisements, especially in the local markets. Marketing has changed since the advent of the internet, so there’s more to it now than just putting an ad in the local paper or magazine.
Spend some time — or hire someone to help — on social media marketing and developing an online presence. In today’s internet age, something as simple as posting before and after pictures of the company’s work can be enough to bring new clients to the table.
2. Learn to Estimate Well
Writing an estimate is an essential part of running a construction business, which means it’s a skill that new business owners should be honing before they even open their doors or try to take on their first clients. Be as detailed as possible, and use a master checklist to ensure that the project stays on track.
Knowing what the local competitors charge for the same services can help you figure out when you can give a higher estimate and when you should try to undercut to secure a job. Accurate estimations will also encourage you to research your business blind spots and prepare for expenses in project areas you lack the experience to predict without careful monitoring.
3. Consider Renting Equipment Instead of Buying
Until they secure a few recurring clients, new construction companies likely won’t have the capital to invest in all the heavy equipment they’ll need to complete their jobs. This fact doesn’t mean they need to turn potential customers away simply because they don’t have the ability to invest in long-term, project-specific equipment.
Instead of taking out enormous loans or putting the business in the red, consider renting the equipment for the first year. Renting doesn’t just save the money you’d spend purchasing the same equipment. It also means that the owner won’t be responsible for maintaining or repairing the equipment if it breaks down, which will lower the bills in the long run.
4. Apply for Business Awards
For new owners trying to build a construction business, nothing looks better than business awards and accolades on a website or business card. Take the time to apply for any local business awards that the business qualifies for. The worst that they can say is that the company doesn’t win — but it can’t win at all without applying.
5. Open Every Possible Line of Communication
Customers don’t want to do business with companies they can’t talk to. Open up every single possible line of communication — phone, text, email, chat and social media, just to name a few. Many construction companies are streamlining communication with clients and stakeholders by investing in mobile technology that allows for instantaneous connection even on a project site.
Customer service will need to be a cornerstone of any new construction business. The team members will be the backbone of the company, so make sure the customer service reps aren’t neglecting them by overlooking a vital form of communication. Investing in such a “soft” cost may seem trivial, but it’s key to client retention and productivity.
Making it in the Construction Business
Construction businesses, like other small businesses, can fail for a number of reasons. Either they don’t have enough financing, they try to expand too quickly, or they neglect their marketing techniques. All of these potential issues are easy to avoid or overcome to keep a new business afloat during the first year and beyond. Keep in mind that 30% of new companies fail within their first two years. Making it past that hurdle will increase the odds that the company will survive for five years, 10 years or more.
Pay close attention to marketing strategies, client retention and careful budgeting. These are they keys to long-term growth, and starting off on the right foot can help construction firms make it past a tumultuous start. Make it past that first-year milestone, and you’re already doing better than a lot of small businesses unable to make it that far.
Written by: Holly Welles, BOSS Contributor
Holly Welles is a real estate writer who covers the latest market trends in everything from residential to commercial spaces. She is the editor behind her own blog, The Estate Update, and curates more advice on Twitter.