How to start a building business
The construction industry is a vital part of the UK’s economy. From multinational corporations to local building firms, these businesses are essential for both commercial growth and domestic stability. This means there’s money to be made for the experienced builders willing to take the plunge and start their own company.
However, no matter whether you want to run your own building business or operate as an individual general contractor, you have to be prepared to work exceptionally hard. From registering your business to purchasing builders’ insurance policies, there is a lot to think about when launching a business. In this guide, we highlight the steps you’ll need to take when starting your own building business.
How to start a building business: simple steps
If you’re a builder and are thinking of going it alone and setting up your own firm, there are a number of steps you’ll have to take. To help you decide if this is the right move for your career, we’ve explained everything you need to do below.
Research your local market
Before you do anything else, research your local market. You need to determine whether or not a building company is a feasible option in the area you’re looking to operate in. If your area already has plenty of construction companies that are supplying demand, you may find it difficult to get your foot in the door. Remember, being able to secure the odd job isn’t enough. You’ll want to establish whether or not you can run a sustainable business in your local area that will keep you in pocket for a good while to come.
Therefore the purpose of market research is to help you decide if your new business can succeed, and if there is a gap in the market to fill. It does this by helping you find out what is currently being supplied to the market. This information should include:
- How many companies you’ll have to compete with
- What, if anything, those companies specialise in
- The general reputations of the companies and their work
- The rates your competitor companies are charging
Once you have this information, you can begin to piece together how your business will fit in - the specialties you’ll provide, how you’ll compete with existing reputable companies, and how much you’ll charge for your building services.
Aside from company-based market research, this analysis can also give you a better understanding of a local customer base - i.e. what demand the market is facing. This includes giving you an idea of how large the customer base is, and what the average age, financial status, and living situation is of the people in the area you'll be based. Understanding these things can help you decide if your business can succeed. It can also give you a competitive advantage and may help you to provide a stronger business plan.
Put together a business plan
After market research, the next step is to create a business plan. This is one of the most important documents you’ll create when first starting out. The process involves putting together a document that illustrates your understanding of how your building business will operate. This could involve highlighting your objectives and goals and how you plan to achieve them.
Aside from acting as a roadmap for your budding company, your business plan can also be a vital part of securing investment and funding. Explaining how you mean to operate during your first few years, a good plan should give would-be investors a flavour of what makes your company unique.
A business plan for a building company should include:
- A short description of your business
- A list of your key goals and targets
- Detailed marketplace/competitor analysis
- Financial planning for the first few years of operation, including investment requirements
- Initial marketing plans.
This is also a good opportunity to decide how you’re going to run your business. Building business owners need to have experience in the managerial and administrative side of things as well as knowing how to plaster a wall - so how do you plan to complete this work? Do you have the skills and experience necessary, or will you outsource some aspects of this work so you can focus on what you do best?
It’s important to note that while small businesses may not feel like a detailed business plan is necessary to start with, if your business is to expand, having a strong business plan in place is very important. As touched upon above, this is because if you are needing to secure a loan - for example to buy building equipment when getting your business going - the bank may request to see your business plan before approving the loan.
Register your business with HMRC
The type of business you choose to set obviously determines the type of accounting and reporting you, as an owner, are responsible for. For this reason, you must register your business with His Majesty's Revenue and Customs (HMRC). Below we explain how to register the two most common types of businesses - sole traders and limited companies.
- Sole traders
To set up as a sole trader, you will need to register as a self assessment tax payer. As an owner, you are responsible for tracking your business’ income and expenses, and filing a Self Assessment return each year.
- Limited companies
If you opt for this structure, you are required to register your business with Companies House. You will also need to register with HMRC to pay your business’ tax.
Secure insurance
Accidents happen in the building trade. And due to the dangerous equipment and heavy materials used by builders, when these events occur, the consequences can be devastating. This is why having financial protection in place is essential. Insurance policies are designed to financially cover you, your business, and any relevant third parties should something go wrong.
Here at Markel Direct, we offer bespoke builders’ insurance. These packages include a range of important policies.
What insurance should builders have?
When you have your own building business, there are a number of insurance policies you should take out. These include:
Public liability insurance: covers your business against injury or property damage.
Professional indemnity insurance: protects your business if a customer claims to have suffered financial loss due to advice you provide, work you carry out or negligence in the course of your professional activities.
Employers’ liability insurance: covers you in the event an employee becomes ill or injured while working. This is a legal requirement for businesses with employees.
Buy the tools and equipment you’ll need
Builders who work for a company might get their tools supplied by their employers, but if you’re working as a self-employed contractor or building business owner, you’ll need to purchase your own tools and equipment. It’s important to remember that you won’t necessarily need every tool available - think about the essentials for your trade and what you’ll actually use. If the time comes when you need a tool you haven’t already got, then you can make a decision as to whether or not it’s a worthwhile investment. If not, you might hire the tool instead.
Grow your business through marketing
The last thing you need to do when launching your new business is attract customers. The best way to do this and grow your business is through marketing. While expensive TV and radio adverts may be the first things that come to mind when you think of marketing, there are many ways to build a customer base without spending money. From good word-of-mouth marketing stemming from quality work to digital advertising, there is plenty you can do. Free social media platforms like Facebook and Instagram are a great way to advertise your business. For a minimal cost, posting flyers/leaflets through doors in your local neighbourhood that advertise your services can also be a cheap but effective marketing method.
It’s also worth considering building a support network of other businesses in the construction trade. Forming professional connections with similar businesses and tradesmen puts you in their mind, which could lead to referrals to potential clients or the exchange of helpful advice while you grow your business. Don’t limit yourself to businesses within your trade, either. Small business groups such as the Federation of Small Businesses hold events which can raise community awareness of your business. This could even give you the opportunity to form partnerships across industries.
Another way to do this is to join a trade association, such as the Chartered Institute of Building. As well as gaining insights from experienced industry professionals and policymakers, you’ll have access to a wide pool of businesses and individuals, enabling you to raise the profile of your own business within the industry. There are also trade associations for more specific areas of construction, such as the National House-Building Council - and being able to show membership of relevant associations may contribute towards your authority when pitching your services to potential clients.
Launching a successful building business takes a lot of time and effort but having the independence to be your own boss and control your own income can make it all worthwhile. That being said, by following the above steps and putting in the required planning and hard work, you can give yourself a great opportunity to succeed.
At Markel Direct, we offer a comprehensive builders insurance policy. This allows you to combine a number of covers together into a single, specialised policy.