Starting your own Construction Company


I have had two of my own construction companies, and think it prudent, that everyone that is considering this adventure should read this webpage. No it is not about success, it is about mistakes, and any initial presumption that fairness and hard work will support your ability to build your own successful construction company. Although I would like to present a very positive and supportive position regarding this adventure, the difficulties, realizations and basic survival instincts of your competitors, will not support this positive and supportive position. I think it is proper to present certain realizations, learned through my two adventures, in hopes that they may provide the insight, and awareness of the reality of the industry, that is required when starting your own construction company. I only have experience with the construction business, however, I have a notion that these observations and comments, relate to most competitive new businesses.

  • Reality. It is essential that you understand the basic foundation and supportive ideals and methodology, of any construction business. That is to make money! Any other reason is not Why would you ever want to start your own construction company, unless money was the ultimate goal? This is reality, and if you start for any other reason, simply go to work for someone else! Although I am sure there are readers of this webpage, who have already been turned off, by my less than positive and supportive position regarding the acceptance of this reality. You must understand that all of your competitors are out there for the money that can be made. They are NOT out to establish a construction business, to better the world, build low income housing, install handicap accessories, construct multi- family buildings, hotels, educational facilities or utilities, unless they make money! I can almost guarantee that you will fail, if you start off with another ideal. This is not to say that, in the future, after success and built up confidence, that you can’t devote some of your efforts to nobler values and goals. However, the need to make money must be your initial ultimate goal.

 

  • Financial stability. Unfortunately this will not occur, unless you are ready to compete with the most devious and morally compromised individuals in the business. Financial stability is a relative term, which means different things to different individuals. The ability to provide the most competitive numbers on a construction job, and still make a profit, is a far-fetched, illogical position. This will not occur. The need to be financially stable is defined by the ability to take a job for less than the actual value that it is worth, and still survive. Do not start a competitive construction company, unless you have the ability to “short “a job, just to win it, and then survive the project to 100% completion. This ability is a necessity in today’s competitive construction marketplace. It is essential that you are capable of withstanding the losses that could be incurred, if you take a job for less than it costs to construct this project. It is mandatory that you establish a reputation within the framework of your competitors, that you are capable of succeeding with a project that you had undervalued, just to get the project. I compare this scenario to having the pitchers in the bullpen to complete the game, no matter how many innings the game takes. It is essential that a new construction company be able to show the marketplace that they can, and will, succeed in obtaining the project, when it is important, no matter how low they need to bid the project.

 

  • It is essential that you have a financial foundation. If you are considering starting your own construction business, it is essential that you have financial strength, well beyond the ability required by No. 2 within this webpage. . This is not financial stability, it is financial strength. There is a big difference. Financial strength is the ability to second guess or short the competition. You must have the financial backing to fortify your abilities to obtain work. It is basically impossible to competitively bid the work and obtain it, by having the legitimate lowest price. This does not occur anymore. You must have the financial foundation to not only sustain and complete a project, when you have bid it too low, you must have the financial foundation necessary to continue your pursuit of other projects, even with this problem project mired in construction. A rich uncle, a supportive hedge fund, a wealthy real estate father, or an organization that has the ability to finance your small endeavor, almost as a hobby, with any losses being easily written off the next tax audit. I understand that there are not many individuals or organizations that can achieve this ideal, however, that is the reason more than 95% of construction startups, fail. You need a strong financial foundation that is solid as granite beneath you!

 

  • Legal support. It is essential that you have, on retainer, a lawyer, who is on your side. The creation of a construction business must be done with the realization that you will be involved with legal issues and controversies. Do NOT think otherwise! Legal support is second to only financial support. I have been involved with some extremely shrewd contractors, and the successful ones have always had great and strong legal representation. It is essential that all of the legal avenues within the construction business be well paved with competent attorneys, who understand the construction business. I remember the attorney that represented my firm, indicating that the entire success of a legal department or company that is on retainer is to keep all of the balls in the air. I can support this comment with multiple examples of contractors that sustained their business, by simply keeping all of the legal balls in the air. This is extremely important!

 

  • Construction knowledge. It is mandatory that you understand the areas that you will specialize in. Do not assume that the ability to build and operate a successful construction company is easy. It takes a special and total understanding of the work, and the industry. If you do not have this, then either hires someone that does, or simply works for someone else until you get it. This requirement is extremely important, and believe it or not, is not always a predetermined prerequisite for an individual starting a construction business. I have witnessed individuals that start immediately when they are extremely young and aggressive. This will work, if you have employees that have your back, as well as the necessary knowledge to perform the work that you are specializing in. Unfortunately, I am involved with a small company, at the present time that has no real construction experience, and is attempting to succeed despite of this. This will eventually fail. You must have the innate knowledge to succeed in the construction business. This is not a business based upon luck or simple ambition; it is a business that succeeds due to knowledge and experience. Please make sure these attributes are present and at your disposal, failure to incorporate the knowledge required to build correctly, will eventually cause you to fail.

 

  • Unrealistic ambitions. This one may appear to be a contradictory statement, regarding the starting of a new business. You must be unrealistic. If you were anywhere close to realistic, you would never consider this. What I mean by unrealistic ambitions is that if the statistics are anywhere close to being accurate, a 95% failure rate is almost a guaranteed failure rate. Therefore, unless you ambition level is highly unrealistic, you will never fall into the 5% success bracket. Ambition that relates to hard and tireless work is the only possible way that you will succeed. The construction business is a highly competitive business, and it is played by some of the toughest, and in many cases, not overly professional, individuals starting businesses. You will have competitors that will do anything to knock you out of the batter’s box. These competitors will be as ambitious and as willing to work as you are. You must have unrealistic ambitions, which will drive you to succeed, over the top of overly ambitions individuals. If you are not unrealistically ambitious and basically a workaholic, do not try to start a construction business!

 

  • Everything and anything goes. It is essential that you have the ultimate goal of creating and succeeding in building your construction company. This is essential! Everything and anything goes. What does this mean? It means that you will do anything to make the business a success! This attitude must include actions that may not fall into the typical ethical and moral values that you were taught when you were a child. Unfortunately, the competition and your peers will push you to the limits of all you stand for, just to win. Construction is the NFL of business creation, due to the type of individuals playing the game. Everything and anything must go, for you to succeed. Please, remember this prior to starting your construction business. Do not start the process, unless you acknowledge this fact!

 

  • Lack of intimidation. You must believe that you are the best, you deserve to succeed, and there is nothing that will stop you from making your well-deserved money. There should not be any thoughts of failure or inability. Watch every DIY show on television, and try to recognize the traits that are consistent with all of the instructors, the developers, the builders. There are a few of them, which I simply laugh at. I have been in this business for over 40 years and have witnessed some of the most knowledgeable and professional within the industry fail.   I have witnessed structural failures as well as significant failures within all aspects of the construction trades, by very competent individuals. It does not work, like they identify on TV. Once again, I want to start to produce the DDIY or Don’t Do it Yourself Network, because, it is very easy to fail. Failure by some of the best in the construction industry, has caused insurance issues, collapses, and other failures that have caused loss of life. It is essential, that if you are starting your own construction company, you are the DIY actor, the teacher, the professor, and you know the construction niche that your company represents. Confidence and total lack of intimidation is mandatory for you to succeed.

 

  • Total and complete confidence. This goes hand in hand with No. 8, lack of intimidation. This personal trait is once again mandatory for you to succeed in the startup of your construction business. It is a highly competitive business, and you must be the top competitor. Just like sports, the winner will be the best, and you must feel that you are the best in the construction niche that you have selected. Without confidence in your ability, no one else will be confident. You are the best, without limitations, and then, you may have a chance!

If you are to start you own construction business, being a good guy or an honorable member of society should have nothing to do with your pursuits. If you think you will succeed in the construction business, with anything less than the total and complete pursuit of success, no matter what it takes, you are wrong.

I was involved with a company, which had decided to use a management program that basically preached, anything goes, as long as the financial and professional advancement of the company came first. This concept was accepted by upper management and preached to the troops. I asked the simple question, what if it was illegal, and the answer was a simple, whatever it takes! Unfortunately as time has passed, and I have consulted for hundreds of companies regarding their ability to succeed, I am now very compromised on my vision for how to succeed. Although I hesitate to admit it, there is truth in the idea, that it will require “whatever it takes” to succeed.

Listed are a number of examples that I have witnessed.

  • I witnessed, first hand, a general contractor accept a public project for literally half the value that it was worth. This general contractor was convinced that they could, out maneuver and outsmart the owner and the developer, and eventually succeed on the project. They were correct! The public funding was doubled to complete the project, and the general contractor is still in the marketplace. How this was achieved, is based upon the principles of success that I have established previously. Whatever it takes!

 

  • Another example of achievement, in spite of correctness, was when I was consulting for another company, which decided to basically, set up another business on the property, in spite of the specifications, the documents and the contract. This business was a crushing operation that netted hundreds of thousands of dollars for the contractor, and basically had nothing to do with the actual project. This continued for over one year, despite the attempts of the owner to stop it. Another example of “whatever it takes “.

 

  • Lack of payment to subcontractors. I have literally witnessed hundreds of accounts that have become over, 120 days delinquent. These accounts have been associated with tens of general contractors. No one seems to care about payments, or any responsibility for moral and ethical adherence to the payment terms of the contract, or even the basic idea that work deserves pay. This concept, as you develop within the construction business, is a concept that really has no following within the new and improved construction industry.
  • I have just recently consulted with a company, that was initially specified as the single source vendor, and spent considerable time and effort developing a proposal and reviewing the project with the owner to ensure its accuracy. The account was literally pulled out from under them, due to an engineering firm, that had a special relationship with another supplier. Again, whatever it takes!

 

  • The amount of instances that I have witnessed, where the individual developer, owner or contractor simply uses a construction company to develop the budget on the project is countless. This development of budget was only meant to identify the actual price level of the project. Once the price level is identified, then the actual preferred vendor or contractor is contacted and the price level is identified to that vendor. Once this preferred individual has the price level, it is very simple to submit a proposal that is more competitive than the pre-established value. I can remember a large home that my business spent countless hours developing the budget, the schedule, and all of the required paperwork on the project. Once our input was received, there was no additional communication, and I traveled past the project one day and there was another contractor, constructing the home.

 

  • Collusion is another aspect of the construction industry that occurs with consistency. It is extremely difficult to formally identify collusion, unless there is a video or an audio tape. When you the contractor, become involved in the short end of a situation, that there was collusion, it is extremely difficult to remain professional. Collusion, in days gone by was performed on a constant basis, when there were fewer general contractors and subcontractors involved with the construction industry in specific areas. I can remember as a young man in the industry, working for a construction company that was basically, one of the primary three in the area. These three, general contractors, would discuss each major project that occurred within their area of influence, and would decide which of the three contractors would be awarded the project. The proposals would be managed to ensure that the contractor selected was the lowest value, and each contractor would support any communication with the owners or developers. Totally manipulated and totally accepted.

Due to the fact that I have been blessed to have been in this business for the last 40 years, I have several stories, incidents and memories of a constant stream, of less than honorable scenarios, that make the creation of a construction company, legitimately, a very difficult endeavor. I could reflect for many more pages regarding these activities; however I feel we have made the point.

The starting of your own construction company, will require several important decisions, associations and personal abilities, that all must combine to provide you the foundation of a successful business. Do not think that the development of the company will be an easy task. The journey is interesting, frustrating and difficult, however, the rewards could be life altering, and beneficial for the remainder of your career.

Or, you can totally fail, and the time spent on the attempt, a total waste of time!

Either way, good luck, don’t ever let your guard down, someone will definitely take a swing!