Building a construction business

[CryptO]

After seven years of very hard graft in the construction trade, I finally decided to pull the plug a few months back and stopped everything. I took time to refocus and literally do nothing other than just enjoy life. But after a while of doing nothing other than self indulging I found myself itching to focus on building my construction business.

I'd put away enough capital to invest in equipment, approx 12000 euros. I know have everything needed to deliver good work (ciment mixer, circular saws, concrete breakers etc etc) however all the larger equipment like tipper truck and diggers I'm having to rent when and where needed atm. I'm sitting at about 5000 euros capital in the bank.

Now to get the work. I put the word out in my own circles, distributed flyers in post boxes and this month I scored my most interesting job yet; building a double garage. Then just as this happened I scored a job for next month which is building an entire house, this job alone is worth about 20,000 gross.

The conditions for me building the house are that I must have public liability insurance and a 10 year guarantee, something I did not want to commit to before as it is expensive!!! But now I have it it'll give my new customers a sense of assurance and also enable me to take on bigger jobs.

I set up a meeting with the insurers and I got full cover for about 25% less than somebody else I know but it still amounts to 322 euros overhead per month, this is more motivation to get moving and keep the income coming in. The reason I got it at a lower price however was I am 2 levels over the minimum qualification in my field and have worked in some pretty major construction firms, all of which they take into account. The cost of my professional insurance will decrease if no claims are made, this means more motivation to deliver better quality work!

So what is the barrier to entry? Well in France to open a construction company you either need to be qualified (which takes minimum 1 year for an entry level qualification whereby you go though an apprenticeship scheme, or you need 3 years experience in the trade).

Anyway, my objectives for this business are now very clear.

• I do not want my business to be a job.
• I want to build a controlled company that I can build wealth
• One that I can have fun growing from a one manned operation into a highly profitable and well oiled machine
• To find good managers
• To build good teams with
• Develop good systems to keep things organised and under control.

I'm at ground floor at the moment but I think I've learned from previous failures what I should and should not do. Internet companies are not my thing.

How do I scale construction business from a one man army?

The technical side I can do hands down but working on my own (although I can earn a nice monthly wage) is not going to cut it. I need to find more profitable clients and contracts and expand. So that is my main focus. Next week I've scheduled a meeting with a good salesman who I'm going to set out a strategy to winning new and bigger contracts. He's prepared to work on a commission only basis whereby he'll get a set lump some for every contract I sign. My aim is to scale fast. The workforce I can get from a work agency where I once worked for quite a few years. I'll try to avoid directly employing people until I have a steady flow of clients etc. I'll only employ people who are very good and are prepared to follow the systems I'm going to put into place.

This is an exciting time for and I love being my own boss. I'd never go back. I know at the moment I've got it easy because I'm on my own with nobody to manage and therefore I can mange everything with ease, but I appreciate things are going to get very different, but even still this month I'll turn over about 11,000 euros, with about 4000 profit. Which is nice.


I'll post another update here in about one month to talk about what I've accomplished with the salesman.


Below is a picture of a concrete pour yesterday that I was glad to do in time because storms were predicted and my trenches would have been flooded had I waited til after the weekend. This enabled me to get a first course of blocks down this morning.

View attachment 5279

 

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[InMotion]

How do I scale construction business from a one man army?

It's a human resource system. You hire more people or contractors or temps.

Getting the jobs is key so be strong in sales.

I have no idea what the construction business is like in France (so it could be completely different) but here in the U.S. I couldn't think of a worse industry to be in, or business to have.....especially for a fast-lane enterprise.

If you can get into building your own developments...you can make money in that; but you can also lose your a$$.

You may have to do some of the actual building work yourself initially but normally you wont make much more than a living if that's what you continue to do.

You must make yourself obsolete to the actual hands on work asap to grow; that means having and keeping competent employees on staff.

Find someone to replace you quickly in the manual labor department and focus on job-site activities then replace yourself there with a foreman then focus almost exclusively on administrative and sales activities; visit your job-sites daily even after you replace yourself, at least until you can trust the staff you have to get the job done.

P.S.-10 years industry knowledge btw.

 

[CryptO]

Progress made over the last 7 days

On site

• Concrete platform poured and power floated to a nice smooth finish (took until 10pm).

Off site

• Business bank account open.
• Set up a partnership with a large scale housing developer.
• Obtained a list of 165 potential customers, within a 30 km radius, in the form of planning permissions that were submitted in April.
• Meeting scheduled with salesman (who is also a friend for many years) for Tuesday morning.

The list contains phone numbers of everybody who has submitted planning permissions within my chosen area. That's why I want the salesman. He's got internet but no internet phone so I'm going to buy him a phone and he'll start working his way down the list asking people if they've already got a contractor signed etc / if they'd like another quote. The idea is to test the water and land a couple of clients from the list and no more for the time being. I then have to price the job out so that I can put workers onto it and I can turn a profit without being with there all the time. Then once we can see it works or need to tweak things ect we can move forward.

That's all for this week.

 

[Bearcorp]

Best of luck, I've worked in the construction industry for 12 years and started off wanting to start a plumbing business before I decided on a different path, I'm looking forward to following your progress. Speed +

 

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[Steve37]

Very tough industry to grow a business you are well funded or connected to the right people. It's certainly doable but it won't follow a fast lane model in terms of timelines. Most of the successful medium to large size guys I know have been in business for a very long time if not generations. Since this isn't a recurring revenue model you're constantly on the lookout for new clients.

If you do go down the contractor road I would avoid residential clients like the plague. Establish relationships with commercial builders and larger home builders and work for them. Would also recommend you specialize in one area and become the best at it. Too many moving parts otherwise.

The biggest piece of advice is to learn the investment side of the business and make that your main focus. Only work on your own projects and you'll never have to really deal with customers. In my experience customers are the biggest detriment to turning a nice profit on a project.

 

[CryptO]

The biggest piece of advice is to learn the investment side of the business and make that your main focus. Only work on your own projects and you'll never have to really deal with customers.

That's exactly where I'd like to be right now but to get there I need to generate some $ before being able to build at low cost and then sell/rent for profit.

 

[Tom.V]

Ick, coming from a guy who has worked in various fields of construction (masonry, waterproofing, roofing, gutters) for the past 8 years, I would suggest you start working on a different means. Though I am more than qualified to work in any of the above stated industries, I know for a fact that it is hard work for little payout. Regardless of whether you are a builder, contractor, or laborer. Too many different variables out of your control, too dependent on market fluctuations, too much overhead.

Jump ship while you still have the chance!

 

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[Bearcorp]

If you do go down the contractor road I would avoid residential clients like the plague. Establish relationships with commercial builders and larger home builders and work for them. Would also recommend you specialize in one area and become the best at it. Too many moving parts otherwise.

Its interesting because I would of advised otherwise. Commerical builders and large home builders here in Aus are notorious for not paying acocunts on time, and trying to keep using you on jobs when theyre behind on payment, until the point where they will simply get someone else in instead. A good mate has a glass fencing business aimed at the top end of the market domestic property and small construction work, he much prefers private work that he gets through his website then dealing with builders. Partically in the current climate, hes had a few regular builders go bust lately which has cost him alot of money too.
However this may not be the same where the OP is based, up to him to come to that decision.

 

[CryptO]

Its interesting because I would of advised otherwise. Commerical builders and large home builders here in Aus are notorious for not paying acocunts on time, and trying to keep using you on jobs when theyre behind on payment, until the point where they will simply get someone else in instead. A good mate has a glass fencing business aimed at the top end of the market domestic property and small construction work, he much prefers private work that he gets through his website then dealing with builders. Partically in the current climate, hes had a few regular builders go bust lately which has cost him alot of money too.
However this may not be the same where the OP is based, up to him to come to that decision.

Having worked with somebody before that had a similar problem and had to close doors due to non payment of accounts I am going to be very cautious of this.

When I asked this person how he'd do it differently he said to be much stricter when it comes to payment. In other words chase non payments regularly with follow up letters from a solicitor etc.

The second point is to choose clients more wisely and if a large job perform a background check.

There are ways to enable payment which we are allowed to do here to help things flow fairly.

30% upfront once the quote is signed and before any work starts.
60% nearing the end of the job
10% upon completion

This is how most of the successful construction companies operate here.

In terms of working for large scale residential housing developers, it is clearly only worth doing with ones who are well established and can be trusted.

I know somebody who used to be my site foreman when I was completing my apprenticeship. He broke away and is in his 4th year working for himself. He's turning over about 2 to 3 houses per month with one such established housing promoter and apparently has not had any problems in terms of payment.

But over here, the most profitable work (but in theory the most risky) is working direct with a client because you've got no middle man taking a cut. Housing promoters want to be low cost in order to win clients, so they pay us low end. Although there is still profit to be made from their jobs by being organised, I see them as bread and butter until more profitable clients are landed.

I would imagine that there are ways to help avoid non paying customers such as asking for proof of funds.

 

[CryptO]

Progress

• Met sales person and handed over the list of people who have recently requested planning permission.
  
• Sales person is buying an internet phone today and starts phoning at lunchtime hours / afternoon and evening
  
• Capped his limit of setting up four meetings with targeted potential clients.
  
• Secured orally my next job with established residential housing developers and was assured I do indeed have a single house to build, starting in as little as 3 weeks. Contract is being put in the post tomorrow for review and signing.

 

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[CryptO]

Progress

• Hired an extra pair of hands who is actually a close friend that normally operates in another trade but he's intelligent and learning fast, plus I can trust him.
• Built walls of double garage. Now its a case of fitting the timbers then roof then rendering and that's one happy customer completed.
• Reviewed plans in greater detail for next project.
• Waiting for a quote from the suppliers of building materials before going ahead and signing my biggest contract yet, I really want to make sure I'm not going to lose money in any way shape or form.
• List of planning permissions turned out to be a dud because everybody the salesman contacted was either finishing the work or in progress.
• Diverting marketing efforts to contacting architects for now.
• Brainstorming new marketing ideas and perhaps more fastlane projects (still construction orientated).

 

[InMotion]

Progress

Met sales person and handed over the list of people who have recently requested planning permission.
Sales person is buying an internet phone today and starts phoning at lunchtime hours / afternoon and evening
Capped his limit of setting up four meetings with targeted potential clients.
Secured orally my next job with established residential housing developers and was assured I do indeed have a single house to build, starting in as little as 3 weeks. Contract is being put in the post tomorrow for review and signing.

I am curious...how does it work in France with construction. Is it a handshake environment or do you have to sign on the dotted line almost immediately like you do here in the states?

 

[CryptO]

I am curious...how does it work in France with construction. Is it a handshake environment or do you have to sign on the dotted line almost immediately like you do here in the states?

It is very much a sign on the dotted line environment.

Once a client verbally accepts a quote they are then asked to formalize it by writing "lu et approuvé" (read and approved) and then a signature and date. Once this has happens the two parties are contractually bound by law to honor their agreements.

A sub contractor is required to do the same thing of reading and approving the terms as laid out by the contractor. Once the sub contractor signs he/she is obliged to complete the works as set out by the contractor and the contractor is legally obliged to make payments upon each successful completion of works (as specified in the contract).

The only time it is ever just a handshake is if you want a situation whereby there is no trace of paperwork. It keeps costs down because there will be no social charges or taxes added on to the final bill. This is what is called "travail au black" and is commonplace in France between people who know one and other, problem is..... it's illegal.

 

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[brumaire]

My father is like the best contractor in Southern California.

He makes great money, but it isn't fastlane, and his time is not divorced at all.

Construction isn't fastlane. Maybe using construction skills and saving enough money to build a house and then start selling homes directly is a way. But trust me, the only way you will get really rich is climbing up hill for years. There isn't really a lot of leverage.

 

[CryptO]

My father is like the best contractor in Southern California.

He makes great money, but it isn't fastlane, and his time is not divorced at all.

Construction isn't fastlane. Maybe using construction skills and saving enough money to build a house and then start selling homes directly is a way. But trust me, the only way you will get really rich is climbing up hill for years. There isn't really a lot of leverage.

I appreciate your concern that this is not a fastlane business, but honestly I'm fine with that because I know that I've got allot more leverage compared to being employed within the construction trade.

My end goal is clear in that I want to get enough money together to start my own building projects and hopefully this can help me get there faster.

Not really for me to say but maybe your father should switch to selling homes directly (unless he enjoys running his non fastlane business)?

 

[brumaire]

He does build properties to flip. He buys them too. He has 4 now in the USA and 1 overseas.

Heed my warning. It isn't fastlane. And it is getting tougher. Lots of cheaper, rip offs. You may be able to scale, but you live and die with the books and busts of the housing market.

My father was extremely lucky, he grew during the recession.

 

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[brumaire]

Also, I want to point out a glass dilemma in your post.

"I'm fine with that because I know that I've got allot more leverage compared to being employed within the construction trade."

These are not your only choices, and this is your living you are talking about. It's like mj saying " yeah I want to run a limo business because its better than being a limo driver"

 

[CryptO]

General update (perhaps I should have put this in general entrepreneurship)

On site.

• Double garage nearing completion, last big push this week to finish.

• Got a taste of how important it is to get the price right when quoting. It hurt when I had to drop $1400 in underestimated costs for the roofing. Big lesson learned.
• Paperwork signed and negotiating materials completed for next job.
• Got my (2 man) workforce ready to start next build.

If the next build is completed successfully I've been told there are 3 more houses to follow immediately after. In current capacity it's just not possible, so I'll need to hire more people, which in turn I'll need to supervise. This will take me away from spending most of the time doing the building myself. Time will tell if that's a good thing this early on and there's only one way to find out!

 

[puckman]

late to this thread, but it looks like you are off to a great start. Congrats. I did the same as a painting contractor in my early 20's. here are a few things I learned;

- All new asset or tool investment is billed to each job. Meaning, you only purchase tools and equipment when needed for a given job, and tie the investment to the job.
- Hire up. This was the hardest part for me. I was constantly dissatisfied with people, especially friends. Because its construction you think you can hire your friends, but thats wrong. Hiring friends kills friendships. If you do expect nothing and have them do the most menial tasks.
-Partnerships are key. General contractors, builders, other tradesmen, renovators, designers, etc etc. Once you lock in a few of these partnerships, business constantly flows.
-Take on bigger and bigger projects. If you truly want to grow, you have to go big. Bid on bigger projects than the ones you are currently working on.
-Build a brand name. Name your company well, create a nice logo, and put it everywhere. Branding is very important, combined with reputation you have business.
-Be legit, fully insured, fully licensed, etc. This is all just branding at the end of the day.
-Be clean cut. Dont tolerate drunks and idiots on your job site. Create the expectation that you are a breed apart, and hire managers that reflect that and you can trust.

 

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[CryptO]

late to this thread, but it looks like you are off to a great start. Congrats. I did the same as a painting contractor in my early 20's. here are a few things I learned;

- All new asset or tool investment is billed to each job. Meaning, you only purchase tools and equipment when needed for a given job, and tie the investment to the job.
- Hire up. This was the hardest part for me. I was constantly dissatisfied with people, especially friends. Because its construction you think you can hire your friends, but thats wrong. Hiring friends kills friendships. If you do expect nothing and have them do the most menial tasks.
-Partnerships are key. General contractors, builders, other tradesmen, renovators, designers, etc etc. Once you lock in a few of these partnerships, business constantly flows.
-Take on bigger and bigger projects. If you truly want to grow, you have to go big. Bid on bigger projects than the ones you are currently working on.
-Build a brand name. Name your company well, create a nice logo, and put it everywhere. Branding is very important, combined with reputation you have business.
-Be legit, fully insured, fully licensed, etc. This is all just branding at the end of the day.
-Be clean cut. Dont tolerate drunks and idiots on your job site. Create the expectation that you are a breed apart, and hire managers that reflect that and you can trust.

Good tips, thank you!

And about the brand name, at the moment the company is named after myself (as many small to medium sized contractor companies are) but I realised after that if I want to sell this business in a few years then perhaps I should change that to something more generic as early as possible.

Also, with regards to the part about categorising new tools to an idividual job, that is something I thought would be best to seperate. You are the second person who has said this now and so I deffinately need to look into that.

 

[puckman]

you can use your last name, a lot of people do that. but yes, if you want to sell, which is an under rated opportunity in the states(starting, building, flipping construction companies), you can pick a name. A geographic name is good, since the business will not likely move from that area, maybe use the name of a natural landmark or historic significance?

 

[CryptO]

you can use your last name, a lot of people do that. but yes, if you want to sell, which is an under rated opportunity in the states(starting, building, flipping construction companies), you can pick a name. A geographic name is good, since the business will not likely move from that area, maybe use the name of a natural landmark or historic significance?

I will get to change the company structure once the turnover hits 82000 euros. This is when there'll be a real chance to change the company name to something sellable (giving me a few months to come up with something).

I like the geographic idea, some very successful companies here are named in such a way that the geographical name can also be abreviated into letters so that the name works nationally.

At last I'll get to have fun naming my own company (again)...

 

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[puckman]

Also, with regards to the part about categorising new tools to an idividual job, that is something I thought would be best to seperate. You are the second person who has said this now and so I deffinately need to look into that.

this is the "buy as you go" model. You will only buy a tool, hire etc when a job calls for it. That way, its paid for, and two, you can factor in your expenses to each job which has tax advantages(at least here in the US). You can even discount equipment purchases, in order to account for the lifetime value of that purchase, when competing for a bid in order to lower your price to win a job. I started my business with a tool box and a honda civic, I ended with several trucks and a large amount of tools and equipment. Most of the big guys I know started like this. No one gets a loan until you have revenue.

 

[CryptO]

General Update

The beginning of construction site 2



On site

• Started digging out the foundations for client number 2 using a contact from the previous job.
• Nearing the end of the day and one of the hydroulic pipes on the digger went.
• Luckily nobody was in the line of fire from the high pressurised and hot oil that exploded out.
• Digger man has to come back tomorrow to finish the job (something that could not have been predicted)
• Being careful I'd left some buffer time as the concrete is coming wednesday and not tomorrow as I was initially tempted.
• Providing he gets the part for the excavator tomorrow we should be fine to finish.

Off Site

• Account open with the concrete suppliers.
• Multiple jobs opening up for September (without any advertising) meaning I'm going to have to expand the workforce from 2 to perhaps 4 or 6 (which also means purchasing more equipment etc).

To do

• Need to get to work on marketing.
• Been slightly demotivated in terms of marketing because I'm getting work thrown at me without even looking.
• I do want to grow very fast so I will need to work harder on this aspect.

Things I learned

• This was mentioned in a previous update but I'd like to mention it again. On job number one I realised that when you don't fully understand something through lack of experience you can get burned pretty quickly. I'd misunderestimated some costs of the timbers (an area I have limited previous purchase knowledge). Next time I find myself in this situation and I'm not 100% sure, I think I'll need to call some contacts etc to find out precisely what is needed and EXACTLY how much it costs (not a guess). It should be obvious but I decided to overlook this and the result was I dropped my profit margin.

 

[CryptO]

Update

• Made good headway with the ground work yesterday and today.
• Ended up having to rent a telehandler but it paid for itself easily (with all that earth to move an excavator plus driver is not economic on their own). Plus with some negotiating I got the telehandler for 80 instead of 125 euros. ALWAYS NEGOTIATE, what can you lose?
• Early start tomorrow to get the anti seismic rebar in place before the concrete pour at 10 am.
• Meeting with sales rep from the concrete suppliers at 9 am where I can do some more negotiating to bring buying costs down.

 

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[nextgen]

Good job on taking action you are really starting to move along! Any update on how your planning on expanding? Are you going to be hiring a foremen? Are you hiring workers and paying them per day?

 

[CryptO]

Good job on taking action you are really starting to move along! Any update on how your planning on expanding? Are you going to be hiring a foremen? Are you hiring workers and paying them per day?

Thanks.

I'm going to start biding on bigger contracts once I get back in the saddle after the summer vacation. Everything pretty much shuts down for the whole of August in France.

At the moment I'm hiring somebody who I trust. His future role is to become a foreman but also to learn the business as much as possible. He has already been encouraged with a 25 % payrise at the end of September. I would like to reward people who deserve it, which he does based on current performance.

To expand I'll initially rely on temp workers supplied by somebody I trust. The people who I see performing well and who seem to be motivated may get a permenant place in my business depending on the size of forthcoming contracts.

ALWAYS DOUBLE CHECK PAPERWORK FROM SUPPLIERS : one item was scheduled to be delivered twice by two different suppliers who were overlapping a delivery, meaning I would have lost 400 + euros had I not scrutinized the estimates beforehand and cancelled.

On site

The foundations and the footings are now laid on site number 2 and so we are exactly on schedule. (allowed 5 days for this).

 

[nextgen]

It looks great. And good job on finding people that know what they are doing.

 

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[CryptO]

Just in the middle of making a bid for a 5 unit development, the deadline for quotes is 23/07/2013.

This is going to be fun, I'm trying to work in 5K profit for each unit.

If I get the job I'll have to put a crane on site plus hire about 4 people.

It's certainly risky, but could pay off very nicely.

 

[CryptO]

General Update

Just handed over an official bid for 171,000 euros.

The quotes from the suppliers came in at last minute and I was 22 minutes after the 4 o'clock deadline set by the developers.

This meant there was no stamped receipt for the quote, but the secretary promised they'd still consider it.

I tried to work in a 20% profit margin which is no easy thing to do when there is so much hungry competition out there. I think the best most small building companies in France obtain is 12%. I hope to top that based on the fact I'll be on site and we can stay optimised in terms of organisation etc.

Time will tell if I get this contract or not, but it is out of my hands now and I feel some temporary relief.

Oh yeah and I should mention.

Credit lines with suppliers etc and rapid payment is extremly important when you're doing this. At the moment, because I'm a new account, my credit line is limited so I'm having to ask for quick payments in under 7 days minus 2% just so I can keep momentum.

On site

Tomorrow I'm back at site one (the garage) finishing off so I can get my final payment on Friday.

Next week starting on the elevation of the walls on site 2 (the house).

Here's a couple of photos leading up to the concrete pour. It's been hard work in the baking heat but worth it!