What Are the Expenses of Starting a New Construction Business

What Are the Expenses of Starting a New Construction Business?

What are the expenses of starting a construction business?

To help you best appreciate the cost involved in starting a construction business, we asked business leaders in the construction industry this question for their best insights. From legal expenses to labor costs to supplies and construction equipment costs, there are several expenses that you would need to take into account when planning to start a construction business.

Here are nine expenses these leaders consider important for starting a new construction business:

  • Legal Expenses
  • Purchasing the Right Software
  • Getting Insurance
  • Contractor Registrations 
  • Obtaining Proper Permits 
  • Labor Costs
  • Marketing of the Business
  • Cost Safety Equipment
  • Supplies and Construction Equipment Costs


Legal Expenses

Hiring a legal team to handle this paperwork is one of the expenses associated with starting a construction business. In addition to the regular norms of registration, trademark, etc., the business is bound by several rules and regulations by different municipal, state, regional, and even federal bodies. This requires the firm to draw up and have in place several legal and regulatory documents. This paperwork is an integral step of starting a construction business and requires the expertise of a knowledgeable legal team well-versed in the process.

Riley Beam, Managing Attorney, Douglas R. Beam, P.A.


Purchasing the Right Software

Getting the right software is one of the expenses of starting a construction business. The most popular software programs used by construction businesses are Construction estimating software, Scheduling software and Project management software. These programs can be very expensive, and they are often required in order to bid on projects. In addition, many construction businesses also purchase CAD software in order to create accurate drawings and plans. As a result, getting the right software is a significant expense for many construction businesses.

Antreas Koutis, Administrative Manager, Financer


Getting Insurance

Safety is always a concern and never a guarantee when working in construction. All contractors should have commercial general liability insurance. If you have employees, you’ll want to cover them with compensation insurance as well. As anyone can imagine, finding the best insurance for your business can be time-consuming. While it may add up to be one of your biggest expenditures, having comprehensive insurance coverage is a must for construction companies. Be thorough when seeking insurance, if you’re looking to get the best coverage for the cost.

Boye Fajinmi, Co-Founder and President, TheFutureParty


Contractor Registrations 

What sets reputable contractors apart from the fly-by-night ones in construction business is the ability to operate with honesty and integrity. Running a legitimate construction business comes with extra costs your competitors may ignore. Almost every city requires registering as a contractor in order to legally take on work within their city limits. But it doesn’t stop there. For each project you take on, there will also most certainly be permits that are required as well. Registration and permit fees can add up over time depending on how many cities you work in and how many projects you take on in each city. Not to mention, the registration fees will need to be renewed every year. However, doing so will set your construction business apart from other less reputable construction businesses and is well worth the investment.

Jeff Becka, Owner, Fence Resource


Obtaining Proper Permits 

You’ll need licenses for anything that you do in your business. Whether selling products, renting space, or even having employees, you’ll need the proper permits. Check with your local government and study what you’ll need to apply. For example, construction licensure protects builders and investors from accidents and zoning issues. In addition, this builds a reputation with good standing amongst the public.

Anamika Goyal, Head of Architecture & Design, Cottage


Labor Costs

Labor is one of the largest expenses for any kind of construction business. This includes paying for your own time and the time of the people that work for you. While it can be tempting to work every hour of every day, it is important to take time off and give your employees time off. It is also a good idea to hire people with skills you do not have. For example, if you are not a plumber, then you may want to hire an expert to do the plumbing for you. This is going to cost you more but it is a better alternative than doing the plumbing yourself and potentially making mistakes that could cost you money.

Luciano Colos, Founder & CEO, PitchGrade


Marketing of the Business

After starting a new business one of the expenses is to market that business. You may have to spend a lot more money to make people aware of your business. For example you have to make a website where you can explain what your services are and what makes you different from others. A well designed and established website makes your business authentic and adds credibility to your business. Running social media ads, collaborating with influencers, organizing events and doing charity are also the ways of marketing for which a new construction business has to spend money.

James Anderson, CEO, Veritas Buyers


Cost of Safety Equipment

When starting any sort of construction business, one must understand the amount of time and money it takes to meet the regulatory standards set forth by the Occupational Health and Safety Administration. Protective equipment, vests, signs, stickers, markers and anything else that are required for any kind of construction zone will cost money for a fledgling business. Safety equipment costs can pile up, but compared to everything else, it shouldn’t be an enormous expense. What does turn out to be an enormous expense is any sort of accident-related injury that occurs on the job. Fines can also be a burden. Make sure you bite the bullet early and have all of the safety equipment you need on hand.

Emily Saunders, Chief Revenue Officer, eLuxury


Supplies and Construction Equipment Costs

You will need some construction equipment and supplies to get started. If you don’t already have a Bobcat or backhoe, you will need to purchase or lease this equipment. You might be able to find used equipment at a fraction of the cost of new, but make sure it is in good working order before making any purchases. You will also need ladders, scaffolding, saws, drills, generators, air compressors, air tools, and other construction equipment and supplies. The cost of all this equipment and supplies can add up quickly, so be sure to factor this into your start-up costs.

Neil Platt, Director, Emerald Home Improvements