How to Start Construction Contracting Business

This article discusses briefly the steps in how to start a construction contracting business as well as the basics on contracts.

Starting a construction contracting business is not easy. It needs skills in the area of management as well as the ability to understand and understand construction contracts.

How does one get a contract? The contractor places a bid on a certain project. Usually, the appointed contractor for the project is the lowest bidder. Thus, the construction project is awarded to him.

The contract is a very important factor in starting a construction contracting business. No project would also mean no profit for the business. You should be able to target who are your target clients and what kind of projects you are willing to compromise with another party. A contractor needs to know the contract by heart. He should be able to delineate and define the scopes of work provided for in the contract. He should be able to complete the project in the stated completion time. Otherwise, he may be forced to pay damages for the completion failure. Contracts may include indemnity clauses which may make the contract financially liable for any injury and damage to the property.

A contractor’s business is no joke. It is one challenging venture. To start a construction contracting business, one should know what are the types of contractors and the nature of work they perform. In a report issued by F.W. Dodge, it shows 30-odd classifications which may be just the type of the projects being catered to by contracting businesses. Moreover, if one classifies the construction firm by the CSI classification methodology, there are 16 divisions. And, in each division has one construction firm catering to its needs.

In starting a construction contracting business, the entrepreneur must know about the functions as well as the in’s and out’s of the business, regardless of the nature of work and the type of project awarded to him:

  • The contractor acquires a project. Along with this, he or she is tasked to estimate the worth and possible expenses derived from the construction. Moreover, he prices the services he will be offering. Then, he bids, markets and sells his construction contract. One has to note that no matter work he places on the estimation, marketing and bidding, if he is not awarded any project, it only means one thing – your prices must be too costly.
  • After being awarded with a project, the contractor now builds. This includes a lot of management skills in the area of your project site itself, the field, material and equipment procurement and the productivity of your labor force. It is also in this phase that payment is usually being made, which may be initial, depending on the provisions of the signed contract between the client and the contractor.
  • The contractor now sees to it that the project goes with the flow – in terms of time and as well as financially. This is where accounting, administration and as well as financial management functions come in. Also, tax reporting comes with this phase.

Competition usual arises from how fast you are able to finish the project. The slower you build means the fewer projects you will acquire. Therefore, you lag behind your competitors. The faster you are means the more you save. You also have to remember that in most contracts, clients check your expected completion date.

1 Comment

  • Sanjeev kumar said on November 29, 2014
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