How To Start A Small Construction Business – As soon as you read the words “organizational chart,” your brain conjures up an image of a complex flow chart in the back of an employee handbook.
You’ll be thinking, “I don’t really need one for my construction business,” especially if you own a small business.
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Owning and running a construction company without this decision making machine is like trying to build a project without a set of plans.
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You will waste time trying to solve problems on the fly. You will waste money because mistakes will be made, which in turn will increase the inefficiency of your production.
Think of the organization chart for your construction business as the set of plans and scope of work for your company.
If you want to remove yourself as the bottleneck, step one to creating an organization chart that works is to define the divisions of your company.
If this is the first time you’ve ever tried to create an organization chart for your construction business, keep it simple.
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List the divisions of your construction business along the X-axis and define them based on how they serve your business.
Before you start stacking all the current jobs in your construction business within your newly defined divisions, create another layer of organization along the Y-axis of your chart.
Roles for your organization may be CEO, Director, Manager, Leads, Support or Entry Level. (see sample organizational chart above).
Executive role – responsible for the successful execution of their respective division to achieve the desired outcome for the business owner.
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Lead role – responsible for leading one or more teams to produce the work and train others on the team(s).
Support role – assisting the managers, supervisors and other staff in carrying out assigned tasks to achieve team goals
Now that you have defined the division within the organization along the X-axis, you have determined the roles (or levels of responsibility) along the Y-axis.
The name of the executive, director and management position is likely to come from a combination of the name of the division and the role.
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Chief Financial Officer (CFO) is the senior position of the person responsible for the financial division of the company.
The Director of Operations (DOO) may report to the Chief Operations Officer (COO), and the project managers report to the Director of Operations.
The names of executive and director positions are fairly standard in most companies. You will have more specific position names for Lead, Support, Entry and even Assistant positions.
Don’t take away the power of the job title or position name. Check out this article where I discuss how clearly designed job titles help create engaged employees for your construction business.
Small Business Organizational Chart Examples
A structured and well-designed organizational chart shows how each position supports the operations of the business at each level and within each division.
It’s the biggest mistake many construction business owners make when trying to create an organization chart. They think about the people who are currently doing “that job”.
Instead, you need to think about what the job is, what it’s called, and how it serves the overall business.
If you design a position around one person, and that person leaves, then you are faced with an impossible task. You have to find another person just like the one who left.
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But if you design the position and list the duties and responsibilities and show how that position serves the overall business, then you can recruit people to fill that position based on the skills and character you need. You don’t have to rely on personality and the previous person’s experience.
An organized business is a more efficient business. You will experience less inefficiency, increased communication and you will have happier employees.
Your organization chart should show and tell your employees their roles and responsibilities and how they serve the overall business.
The best way to show your employees a path to success, or “what’s next” is to create, display and update your organization chart.
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“It’s a tool that all employees can use to learn who to turn to with questions, key information and concerns.” – Bruce Eckfeldt
If you want a step-by-step hiring system, including how to design an org chart that works as a decision engine, sign up for the Built to Grow program in the Built to Built Academy®. Click here to apply to the Built to Grow program and secure your place in our next cohort. Deciding to start your own construction company can be an exciting, but overwhelming experience. With so much research, reporting and paperwork to complete, it’s easy to get lost in the administrative details and forget the passion that inspired you to start your own business in the first place.
In fact, 68% of small business owners regret not spending enough time learning the basics of running a business in their first year. Fortunately, the process of starting a construction business is actually quite simple, as long as you know where to start. Construction companies take time to plan and build, so starting earlier can set you up for success later.
And while COVID-19 has caused production shutdowns in major cities, there are still 36 states where construction is considered an essential service as of this writing.
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We’ve compiled everything you need to know to get your business off the ground, from how to write a solid business plan to what types of insurance are needed and more. How to start a construction company, divided into 5 steps. Click on the links below to jump to each section:
Thanks to the Internet, there is an abundance of free, publicly available data available to you, as long as you know where to look. Here are some good sources of information that you can use when doing market research:
Doing your research beforehand is optional, but it will make the rest of the process of starting your construction business much easier. In particular, having completed your research will make it much easier to complete the next phase of the process: writing your business plan.
Every startup needs a business plan, not only to guide you through the process of starting your business, but also to help raise investment funds, get approved for loans, and more. Here are the steps you need to take to write up your construction company business plan:
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The executive summary is the introduction to your business plan. It should be short (one or two pages), comprehensive and persuasive.
The Small Business Administration recommends that you include your mission statement, basic biographical information about your business, the products and services you offer, financial highlights and funding goals, relevant past successes, and your future plans for the business. The rest of your business plan will contain the same elements touched on in your executive summary, but in more detail.
After the summary, give an overview of your company: who the founders are, when it was formed and what it does. You should also write a value proposition that states why your company’s offerings are in demand in your particular market.
You should also be sure to note here whether your business is structured as an S-Corp, a C-Corp, or an LLC, and how ownership is divided if you are not the sole founder.
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In this section, you must provide the research that proves the existence of a specific demand in your target market and why your company is uniquely positioned to meet that demand.
This section is where you go into detail about what products and services you offer. Discuss current or past projects that can serve as examples of your company’s offerings, if possible. Since construction is also heavily dependent on material supply, highlight any existing partnerships you have with construction suppliers, subcontractors, etc.
You may also want to include the type of contract you plan to use with potential customers. Lump sum, unit price, cost plus, and time and materials contracts all handle materials supply in different ways, so your supplier needs will vary depending on the type of contract you plan to use.
Provide a comprehensive overview of your company’s current finances and where you plan to be financially in the future. If you don’t have past financial data, include projected versions of the same document and attach the market research and analysis you used to make those projections.
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You should also document all your debt obligations – this includes other investments you have secured, mortgages on company property, equipment loans, etc.
Finally, you will include the financial details of the funding you need or hope to raise. Include the funding you are currently seeking as well as any additional rounds of funding you expect to be necessary in the future. Be sure to earmark each amount for a specific purpose, such as equipment purchases, property leases, etc.
Any charts, notes, research, or other information that you think is relevant to your business plan but is too long or doesn’t belong in the document itself can be added to an appendix.
Once your business plan is complete, it’s time to make it official by legally registering your business with federal, state, and local government agencies.
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1. Decide on a business entity: Choose your business name and decide whether to register as an LLC or a corporation.
2. Get an employer
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