How Much Does it Cost to Start a Construction Business? 7 Factors to Consider

The construction business is always appealing. Don't miss as we discussed how much does it cost to start a construction business.
cost to start a construction business

Before you can start a construction business, you need to know how much does it cost to start a construction business in order to ensure your venture will be successful and profitable. There are numerous factors that you’ll need to consider, both for set-up costs and ongoing expenses.

Here are seven of the most important factors you can’t afford to ignore.

1. Licenses and Permits

One factor you need to address early on is the one-off cost of obtaining licenses and permits from your local government. The exact cost will depend on the business structure you choose and your location. But you can expect to pay anywhere between $100 and $1,000 on licenses and permits.

Look at which ones you need for your precise construction business and location to determine the exact cost of this expense.

2. Rent and Utilities

Renting premises will be one major cost you’ll need to pay to set up your business and keep it operating each year.

Again, the exact cost will depend on the size and location of your business but expect to pay in the region of $1,000 per month on rent. You also need to budget for utilities, which are likely to exceed $100 per month.

3. Insurance

Every construction company needs to pay for insurance. You’ll need a number of different insurance policies.

Two that you will definitely need are general liability insurance in order to protect your business from lawsuits and other damages and workers’ compensation insurance in order to protect your employees in the event that they are injured at work.

General liability insurance can cost around $3,000 per year, but the exact cost will depend on the size and scope of your construction business. The cost of workers’ compensation insurance will vary too, but you should be prepared to pay around $1,000 per year.

4. Equipment

You won’t be able to start a construction business without equipment. You will need to spend a lot on set-up costs to purchase construction equipment. Over the years, you will need funds to buy more equipment and replace equipment.

You will need to buy power tools, hand tools, office equipment, and trucks, to name just a few things. The cost can vary wildly depending on the size and scope of your operations, but in general, you can expect to spend at least $20,000 on equipment.

However, you can save on costs by buying second-hand equipment. For example, purchasing a used dump truck in full working order can enable you to make significant savings.

5. Salaries

One major ongoing expense that you’ll need to pay for from day one is employee salaries. As a construction company, you’re sure to need to hire a number of workers.

The exact cost will depend on how many people you hire and your location, but you would need to spend at least $250,000 on salaries each year.

6. A Website

To rank high on search engines and enable prospective clients and customers to find your business and encourage them to use your services, it’s vital that you set up a website that utilizes UX and UI methods and incorporates SEO strategies.

The cost of building a website will depend on your precise needs, but you will likely need to spend a minimum of $500 to get a professional-looking website set up before you launch your construction business.

7. Marketing

Your website is just one part of your marketing arsenal. If you want to reach potential customers, you will need to allocate a large chunk of your budget to other marketing methods, which will include advertising both online and offline.

The amount you spend on marketing early on is sure to be high, but you’ll also need to allocate marketing funds for each year of your operation. You could spend something like $20,000 per year on marketing.

The Overall Cost

It’s clear that the precise amount it will cost to start a construction company is dependent on various factors, such as the size and location of your business. But in general, small construction companies can expect to spend around $50,000 on startup costs, while larger companies will be looking at spending in the region of $500,000.

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