A Guide to Starting a Construction Company in 2024

min read

A Guide to Starting a Construction Company in 2024

Why should you start a construction business?

Starting a construction business certainly isn’t a walk in the park. Becoming your own boss requires dedication, passion and the funds to get things going. There’s often a lot of business jargon and regulations to get your head around, and you’ll need to have the drive to succeed, even when obstacles get in your way.

But as long as you’re prepared and have a detailed business plan to rely on, there’s no reason why you can’t have a thriving construction company to your name.

There are several benefits to starting a construction business, including:

Growing industry: The construction industry is an integral part of economic development, from housing to commercial spaces. With the Department of Education planning to rebuild hundreds of schools over the next decade, and the value of construction new work having increased by 15.8% in 2022, you’ve chosen a bustling industry to be a part of. It’s likely you’ll never be short on work!
High earning potential: As the owner of a construction company, you have the potential to earn significant revenue, with the industry set to increase to a revenue of 476.6 billion by 2027.
Diversity: The construction industry offers a variety of specialisations to make your mark in, from residential to commercial construction or even civil engineering. Or maybe you’d prefer to cover all bases, where your next project is in an entirely different field to your last, to keep things exciting.
Independence: Nothing compares to the feeling of being your own boss. Entrepreneurship offers complete autonomy, allowing you to foster a work culture that reflects your values.
Innovation: The construction industry is constantly evolving, particularly in terms of technology and sustainability. Starting your own construction business allows you to encourage innovation and contribute to positive change in the industry.

How much money do you need to start a construction business?

How much money you’ll need to get your construction business off the ground will vary depending on the type of services you’ll offer, where you’ll be based and your business model. According to industry estimates, the average budget for a new construction UK startup is around £5,000.

Our guide on the cost of starting a business explains the costs you’ll need to consider in more detail.

Do you need qualifications to start a construction business?

If you’re interested in starting a construction company in the UK, chances are your construction knowledge is up to scratch already. But there are some qualifications you may choose to have, and regulations you must adhere to, when starting a construction company, including:

Construction Industry Scheme (CIS) registration: If you’re planning on paying subcontractors to do construction work, you’ll need to register as a contractor with the CIS before you take on your first subcontractor.
Construction Skills Certification Scheme: CSCS cards serve as proof that those working on construction sites are qualified to do so. You’ll need to pass a health and safety test to qualify for a card, or be working towards a Level 2 or Level 3 N/SVQ.
Training: You may choose to gain a construction qualification, or you may ask your staff to carry out construction training to ensure they know the tricks of the trade. A well-respected qualification is Construction Skills offered by City and Guilds, which covers the key areas of the construction trade.

Steps to starting a construction business

Below, we’ve put together the steps you’ll need to take when starting a construction company so you’re fully prepared for your exciting new venture.

Start with market research and analysis

You won’t know your potential customers' value and how to appeal to them without market research. Prioritising market research can help you stand out in a competitive industry. The first step is to define your niche and the specific services you’ll offer as a construction business. Perhaps you’ll specialise in commercial construction, or maybe residential construction is more your forte. Once you’ve decided on your niche, you can identify your target demographic, from other businesses to homeowners, and start to define how you’ll appeal to them.

Other considerations include:

Competitor analysis - identify existing construction companies in your area, their strengths and weaknesses and the gaps your business could fill.
Customer needs - try to spot any unmet needs and where you could provide value.
Networking - reach out to others in your industry to gain valuable insights, attend events and learn from others’ expertise.
SWOT analysis - try to carry out a SWOT (strengths, weaknesses, opportunities, threats) for your new business and use your findings to address your opportunities and limitations.

Create a solid business plan

Your business plan is a written document detailing the ins and outs of your business goals, financial projections and overall strategy. It’s an essential part of your entrepreneurial journey, and something you can turn to/

Not only does your business plan hold you accountable, but it’s also crucial if you’re looking to attract investors. The financial section will explain your forecasted sales, cash-flows and expenses, which potential investors will read to decide whether their investment is worthwhile. Your business plan can also help you to prepare for any challenges you may encounter that could impact your profit margins as a construction business, such as fluctuating material costs or changing market conditions.

Legal considerations and company formation

You must get to grips with the legal requirements of starting a construction business - the last thing you want to do is break the rules.

The most common licences you may need when working on a construction project are the following:

Oversail licence: Should you need to bring a tower crane onto a work site to carry out a job, you may need an oversail licence if the jib of the crane needs to swing over any land that the developer doesn’t own. If this is the case, you’ll need to calculate the radius of the jib and try to get an oversail licence with each of the affected landowners.
Scaffolding licence: Should you need to use scaffolding on or over a property that isn’t owned by the developer, you’ll need to obtain a scaffold licence. Without one, you’ll be trespassing and may face expensive legal disputes.

Company formation

Next, you’ll need to decide how you’ll start your business from a legal perspective. You can choose to form your business yourself through the UK’s national registrar of companies, Companies House for a £50 fee.

Alternatively, you can trust a company formation agent to form your company on your behalf. Choosing SUAZ as your company formation agent can alleviate any concerns you may have about forming your company - we’ll form your company directly with Companies House completely free of charge, and you’ll have our advice at hand should you need it.

A note on health and safety considerations

As you can expect, health and safety is a top priority in construction due to the potential hazards and risks you take on as part of the job. Not only is the wellbeing of you and your workers at risk, but so is the health of the public and the environment.

In 2015, the Construction (Design and Management) Regulations 2015 came into effect, replacing CDM 2007. This publication describes the law that applies to the construction process, how you can manage health and safety in construction and what you must do to carry out projects safely.

Financing and funding your construction business

Starting your own business can be expensive, but this shouldn’t deter you from making your business dream come to life. You’ll need to decide the financing or funding option that works best for you, depending on your financial circumstances.

You may choose to take out a business loan to get you one step closer to entrepreneurship. Like other types of loans, you apply for a business loan through a bank and will need to repay the amount over time, usually through monthly repayments. How much you can borrow usually depends on your credit score and the bank’s borrowing limits. The bank will likely ask to see your business plan to understand what you’re using the funds for, and to ensure you have the means to repay.

Alternatively, you may prefer alternative funding options such as crowdfunding, whereby you get a ‘crowd’ to fund a project, such as your new company. There are a few forms of crowdfunding to consider, such as donation-based funding where people will give you money without expecting anything in return, and equity funding where backers will receive a share of your business. Take a look at our guide to startup loans and business funding for more details.

Tips for scaling your construction business

As we’ve explained, scaling your construction business requires extensive planning, decision-making and drive to achieve your goals. Perhaps you’re looking to become a contractor specialising in residential construction, or commercial construction is calling your name. The key to success is a well-executed strategy - which can be implemented with the following tips:

Financial management: Having the funds to start your business is one thing, but making sure you keep on top of your finances is vital for business success. You’ll need to maintain up-to-date financial records, monitor your cash flow and stick to your budget. You may choose to hire an accountant to help you keep on top of things and alleviate any worries you may have.
Marketing: From digital marketing to social media, marketing your business is crucial to getting your business’ name out there. Once you’ve identified your target market, you can tailor your marketing efforts to appeal to their needs and values.
Growing your team: The construction industry is collaborative and there’s nothing that teamwork can’t solve. Why not recruit some talented construction professionals who help grow your business?
Manage risk: Make sure you identify any potential risks to your projects ahead of time and have a strategy in place to mitigate them.

How SUAZ can help you

If you’ve caught the entrepreneurial bug, what’s stopping you from chasing your dream? Starting a construction business could be life-changing, and we’d love to support you on your journey to success. Our professional company formation service can guide you through the process, with support there whenever you need it. There’s no reason to wait - form your company with SUAZ today.