534: The Rundown To Running Your Own Construction Business

This Podcast Is Episode Number 534, And It's About The Rundown To Running Your Own Construction Business

Getting your construction business up and running and making a profit is usually much more complicated than it sounds. So let's focus on honing the skills you'll need to make it happen by acquiring these yourself or consulting professionals to help you.

What it means to be your own boss

Being your own boss might sound like it is the ultimate ticket to freedom and financial success – and it can be. But don't be fooled into thinking you'll be able to put in a few hours each morning and spend the afternoons networking over a round of golf. The reality is that most businesses require much hard work – more than your standard 9–5 job and over some years – before they start to make a reasonable profit, and many new construction businesses fold before they reach that point.

Here are the top things you should be aware of:

You need to be passionate about what you do: Setting up your contracting business is challenging. If you're not passionate about what you do, you'll find it hard to stay motivated when faced with several hurdles. Also, if your business is just another idea to make money and not something you're passionate about, you'll lack that key ingredient to make your new business more attractive than the established competition. Before you start a construction business, ask yourself if you're passionate about this industry.

You'll need to make sacrifices, at least during the first couple of years: You'll need to put in a lot of hard work between coming up with your business idea and establishing your business. You'll probably have to work harder than most of your mates and make many sacrifices. It might mean less time with your friends, less time for sports or hobbies, or even less time with your family. You'll also probably be taking home less money – and might need to sacrifice family holidays or put major household purchases on hold until your business is established. Ask yourself if you're prepared to make the sacrifices necessary to make it a success – and check that your family is prepared to make these sacrifices too.

You'll face risk and uncertainty: When you start your own business, you won't have the security of regular payments from an employer. Your business might be unable to pay you a wage for the first few weeks, months, or years. In addition, you might need to draw on your savings or even take out a loan to finance your business operations. There's an element of risk and uncertainty when you start your own business, so you need to be sure that your construction business idea is viable and that you have enough money to support yourself and your business until you reach your break-even point and start turning a profit.

You'll need abundant patience and persistence: It's rare for a start-up that has everything run according to plan without any teething problems. You'll likely encounter your fair share of setbacks and challenges, from financial issues to demanding customers and problem staff. While there's a fine line between persisting against all odds (when the business is not viable) and giving up when the going gets tough, you'll need patience and persistence to make your business a success.

Getting the skills you need

Very few people who own businesses start with all the necessary skills. The secret is to quickly inventory your current skills and identify the gaps in your knowledge base. You can then either get the training you need or employ people with the right skills for those areas you don't have a natural affinity for.

You'll need the following skills to run your business.

Market research skills to understand the market you are entering and stay abreast of market developments, customer preferences, and the actions of your competitors.

Money management skills to forecast when you expect your business to break even, understand your financial position at any point, and asses the financial implications of any business decision you make.

Marketing and sales skills to effectively promote your products or services and reach your break-even target sales as soon as possible.

People skills to help you manage and motivate your staff and deal with customers.

Negotiating skills to ensure you can strike the best deal when dealing with suppliers or bidding contracts.

In the longer term, it's a good idea to do courses in all these areas, even those you're uncomfortable with. If, for example, you don't like figures, or feel you are not good with people, try to develop these skills over time. A rudimentary understanding of financial statements and what the critical metrics for your business mean will help you run your business better and improve your people skills if that is your area of weakness.

"Do you have what it takes" Self-test

Here's a quick self-test you can take to see what it takes to start your construction business.

1. Do you have several years of experience in the trade industry you're considering entering? If not, it might be best to wait a few years until you increase your knowledge and contacts.

2. Starting your own business is challenging. Do you thrive on challenges? If not, starting your own business might not be your best option.

3. A wide range of skills to run a business successfully would be best. Are you prepared to undergo training to develop the skills you need or to heed input from specialist advisers in areas, not your specialty?

4. There's no fallback guy when you run your own business. Do you enjoy making and being responsible for your own decisions? 

5. You'll need to invest much time into your business start-up. Are you prepared to work long hours without the security of a steady income?

6. You might not be able to pay yourself a wage for a while. Are you prepared to lower your standard of living until your business starts to make a profit, and do you have sufficient savings or an alternative income to live off during the start-up period?

7. Most small businesses fail due to inexperience, poor management, or lack of planning. Are you actively working on overcoming these common problems? 

8. Starting your own business has implications for your family, including less income, reduced family time, and taking on additional responsibilities. Does your family understand this and unconditionally support your desire to start a business? 

9. Regardless of how excited you might be about starting your own business, there is a chance you might fail. Are you prepared to risk losing the money you invest in your business?

When a business starts, it's natural for you, the owner, to be a jack-of-all-trades. You may not have the capital to hire specialists or access the technology to help you. As your business grows–or as you look to take a minor role in your construction company–you may find the industry has become over-reliant on you, making it challenging to take a step back.

Final thoughts

Have you M.A.P.ped your business yet? Consider this before retreating and delegating:

Marketing - never sells more than Production can provide; on-time and on-budget Accounting - manages the money to maintain operations and produce a reasonable profit Production - delivers the project intending to exceed customer expectations

As you know, we are big on Construction Marketing, Accounting, and Production; having a basic operation manual in place for your office, remote, and field employees pays off in the long run.

It won't be easy to run your construction business on your own. Are you prepared to hire staff and delegate responsibilities to them or use the services of a professional? If not, this could reduce the chances of your business being successful. 

Call, email, or fill out the form on the right to schedule a free consultation with me - regardless of where you are in you're construction business journey.

About The Author:

Sharie DeHart, QPA, co-founded Business Consulting And Accounting (Fast Easy Accounting) in Lynnwood, Washington. She is the leading expert in managing outsourced construction bookkeeping and accounting services companies and cash management accounting for small construction companies across the USA. She encourages Contractors and Construction Company Owners to stay current on their tax obligations. She offers insights on managing the remaining cash flow to operate and grow their construction company sales and profits so they can put more money in the bank. Call 1-800-361-1770 or sharie@fasteasyaccounting.com