How to start a construction company in the UK
10 May 2023
Getting into the construction business industry comes with challenges, but the rewards make the journey worth it. Construction is a satisfying trade, and even more so if you’re running your own business. Learn how to start a construction company, as well as how to make it thrive, in our guide.
To start a construction company, you will need thorough market research; a business plan; to register your business, secure permits and licences; and hire your team and kit them out with essential construction equipment. Let’s break it down into manageable steps…
In this article:
Why start a construction company?
How to start a construction company?
Market research
Business plan
Marketing strategy
Register your business
Network
Hire employees
Secure clients
Equip your team
Knowing legal requirements
Why start a construction company?
The UK construction industry is one of the largest industries in the country. In 2023 (the most recent data available from ONS), the value of construction new work was at a record high of £139,029 million. With such a large margin for profit, and no shortage of business, the idea of running your own building company and being your own boss is not only plausible, but an attractive idea.
Starting your own construction business is a popular choice for many experienced builders. It enables you not just to apply your hands-on skills, but choose your own projects and step up your career.
The construction industry is always ready for new businesses, but knowing the right tactics, plans, and resources available to you can hugely improve your chances of success. Construction companies come and go, but those that conduct research, understand their market, and plan strategically are the ones that succeed in the construction business market.
In this article, we are going to explore everything we know about starting your own construction business, and what you need to know to make it go from an idea to a fully fledged concept.
How to start a construction company: in 9 easy steps
Obviously, starting your own construction company is no easy task. You need a business plan, thorough market research, a reliable network and supportive team, as well as robust supplier contracts and quality equipment.
It takes time and dedication to run a successful business, but with these 9 steps, you should have a better idea and structure for moving forward with your own construction businesses.
1. Research your target market
This is key, and really lays the foundation for a successful construction company.
Ultimately, construction services can only succeed if the business idea has a place in that economy. For example, running a landscaping company in the centre of London would be pretty tough: garden space is more limited, so your market would be slim and the competition would probably be very high with established companies already dominating the limited market.
Local construction companies thrive by knowing their market, being a part of the local culture, and offering great services that can compete with bigger entities. Hence, you need to know your market, know the competition, and know what you can offer to your market that sets you apart.
Define your niche
Research the specific area of construction you will focus your new business on. Covering too much ground, particularly early in your company’s lifespan, can mean you spread your resources too thinly. Try honing in on your area of expertise to create a specialist niche. This will help you to stand out in the construction market.
See what other businesses exist in your area covering this service, what they offer and how you can provide an edge over them for potential customers.
Research pricing
If you can find out how much people charge locally for the service you want to offer, you can understand how you might sit in the market. Will you be a premium service, or more of an everyday-man that can help people that need a quick fix?
Your pricing will influence your customer base, but your target customer base should also influence your pricing. If you’re operating in a more affluent area, you could charge more without losing your customers. If you’re in a developing area, you might need to lower your pricing bracket in order to attract local customers. However, you will of course need to balance this with the cost of your labour, supplies and other expenses.
Research local job requests and bids
In advance of creating your business plan, it’s a good idea to research what kind of work people and companies in your area are looking for.
You can use free resources like industry reports, directories and even local social media groups to understand what the need in your area is. This will help you understand where to focus your business and can direct your business plan.
2. Develop a solid business plan
Know your market? Know your strengths? It’s tempting to jump straight in and start working, but take the time to thoroughly complete your market research and assess whether your business idea is truly profitable. It can also be helpful for securing any business loans you might need in order to get set up.
This foundation can be the difference between failure and success when it comes to starting your own construction company. Develop a good business structure and hold yourself accountable.
What to include in a business plan for a construction company:
Your construction business plan needs to include an executive summary, company overview, market analysis, financial projections, and a marketing strategy.
Try to cover:
- The opportunity that you are addressing. For example, what is the problem, and how are you the solution?
- Your services
- Your experience and what makes you unique
- Your target market
- Will you subcontract or be the contractor?
- Will you hire staff or subcontractors?
- Financial planning, such as how many jobs do you need to carry out or bid on to ensure good cashflow, as well as how much you’ll need to charge
- Your marketing strategy (see below!)
- Information about the competition (and ideally, how you’ll stand out!)
- Sales and revenue goals, including information like your profit margin
- Expense planning
- Equipment planning
3. Develop a marketing strategy
Alongside a business plan should be a marketing strategy. You need a viable plan for getting your name out there into the world. Are you going to use social media, paper based ads, emails, or something else? Knowing your market can hugely help your marketing strategy as you can target your demographic with specific ads.
Obviously, it can be tricky to learn marketing skills or tactics such as this if you have never done it before, but you would be surprised at the amount of tips you can find online to help with this. Do some research and do the best plan for you and your new construction company.
Look at how peers are doing it and ask yourself, how can I do it better?
Be prepared to make changes
As your company develops, you will want to adjust the marketing plan.
Customer testimonials and reviews are huge for the construction industry, so think of ways in which you can encourage customers to like your pages, leave reviews and add testimonials.
You can promise the world to customers, but until they see proof that you are able to carry out the service you provide, you may struggle to close deals.
4. Register your construction company
Once you have your business plan in place, know your market, and have an idea of how you’re going to promote your services, you need to register the company.
Submitting the business as a limited company helps you to separate the financial affairs from your own. Keeping your personal and business finances separate protects your personal assets and allows your company to be legally recognised.
Now all the planning is done, it’s all about making it happen.
5. Register for the Construction Industry Scheme (CIS)
You will then need to register the company under the CIS before you can start trading. This is a legal requirement for building companies. It makes sure payments are being handled properly by contractors and subcontractors – requiring contractors to make tax deductions on behalf of their subcontractors.
6. Grow your network
Now that your company is registered and you have your plan in place, you need to start establishing a network.
This includes a network of suppliers to help with your projects, as well as potential avenues that will provide you with work.
Understanding what other companies you can work with that offer services you could benefit from is key, as well as knowing where you can find potential business.
Growing a good network can help to give you that early push to get your new construction business off the ground.
Consider joining online groups to start building relationships, as well as attending relevant events in your local area.
7. Hire employees or contractors
Once you have all the aforementioned factors in place, you need to start building a team to complete the jobs you take on.
You want a reliable team that has the skills needed for the potential jobs you have in mind, so take into account your business specialisms identified in your business plan to ensure you get the right employees or contractors.
You might just want a network of contractors or you may want to hire full time team members – work out which is the most financially suitable for your goals.
When you begin to hire people, you will need to consider handling payroll correctly. It can be a good idea to hire an accountant.
8. Look for clients and construction projects
Now you have the business plan and the team, you need to start taking on jobs. With all the previous market research, networking, and planning, this part should be a lot easier. You should already have your clients in mind at this point, now it is simply about making it happen.
Just don’t be put off by the word no; you’ll get a lot of people turning your offers down. Remember, other companies will be offering the same services, and they could already have a good word of mouth presence in the area.
Until you have a few jobs under your belt, it might be tricky acquiring the first few customers. Have patience and stick to your marketing plan!
9. Purchase or rent equipment
Got your first few job offers coming in? You need the equipment for your team to use. For bigger companies, it often works out better to buy the equipment outright, but for a smaller, new construction company, hiring equipment is essential.
Obviously, some key items of equipment will need to be purchased for day to day tasks, but for more specific equipment that might only be needed for one job, then hiring is a great option.
Companies such as us here at PAL Hire, offer you with a full range of construction tools and equipment. From full site setups to specific niche tools, we can sort out everything you need.
If you feel hesitant to take on a job because you’re lacking the equipment needed for it, then one simple phone call to our team could sort that.
Working with PAL Hire could be the difference between taking on two new contracts or none. We can help you to have the tools you need to always take on any contract thrown your way.
Tip: Know the legal requirements
You could start a successful construction company and totally miss one of the many necessary legal requirements and have your company harshly penalised, and in the first few years that could be detrimental.
Know building regulations, health and safety regulations, insurance, and other requirements which are needed from your company to conduct business. As a business owner, you’re expected to know this, so reach out to others in your field and ask for help on anything you’re unsure about.
Construction business FAQs
How much does it cost to start a construction business?
How much it costs to start a construction business will depend on your business model, specialisation, existing resources and more.
Some of the costs include: legal advice, registration fees and licenses; marketing materials; setting up transport; insurance such as public liability and professional indemnity insurance; financial advice and hiring an accountant.
Cost Estimator predicts it costs anywhere from £500 to £5000 to start a construction company.
Can I get funding to set up a construction company?
Yes, securing funding is one of the most common ways to start a new business, including a construction company. Many banks offer start up loans, but there can be grants available in certain places, depending on your business model.
You’ll need a detailed business plan in order to secure funding, as banks want to know they’re making a sound investment.
How much should I charge for work?
How much you should charge when you start a new construction business will vary according to what you’re offering, your experience and your expenses. Some new businesses will charge less in their first year or so of trading in order to build up a customer base, and increase prices when business is more established.
However, you will need to ensure that you’re charging enough to cover your expenses as a minimum, and then decide on your profit margin, or your business won’t be viable.
Should I buy or hire my equipment?
Typically, you will need to buy certain tools and equipment that you will be using every day.
However, you will want to rent construction equipment that you will use less often. For example: some plant hire, welfare toilets for construction sites or even site generators for the occasional project where you’re working off the grid.
