Builders work on construction jobs of varying size and complexity for domestic and commercial customers, frequently working alongside a number of other trades. Our practical guide will help you start up and run your own building firm.
- What competition will your building firm face?
- Decide which building services you will offer
- Your work rate
- Pricing building and construction jobs
- Promote your building business
- Buy an existing building and construction business
What competition will your building firm face?
When you plan your building business it's important to think carefully about who your potential customers will be and make an assessment of the level of existing competition. Doing some market research will help you with this.
Customers
Think about how many people are likely to use your services.
Domestic building work
Pay attention to the type of housing in your area. For example, are houses large or small? Are they old or new - and are there many heritage and listed buildings? Do they appear well kept or run down? What building styles, building techniques and materials have been used? Is accommodation mainly owner-occupied or mainly rented? Are some houses owned by the local authority or by a housing association?
Find out about local planning requirements and restrictions, particularly any that apply to the type of building service that you intend to offer.
Work for other businesses and organisations
Think about other buildings in your area. Shops, pubs, offices, factories, schools, churches and so on are all likely require general building and maintenance services at some point.
Once you have identified who your potential customers are, you can direct your advertising efforts at them.
Contract construction work
Find out about any proposed new housing developments and regeneration schemes planned for your area if you decide to tender for this type of contract.
Large organisations who invite firms to tender for contract work may be reluctant to use a newly established business. Also, a young business may have difficulty in funding a large contract, as many things may have to be paid for well before any payment is received. But it may be worth finding out who is responsible for putting building and maintenance work out to tender in large organisations such as housing associations and local authorities. Try to find out how the tender process works and what you would have to do if you wanted to tender for a contract.
Sub-contract building work
You may decide to try approaching other businesses that might require your services. You could, for example, send your details to large contractors who operate in your area and might require the services of, say, a groundworks sub-contractor.
Own account speculative work
From time to time the opportunity might arise to undertake renovation or new building work on a speculative basis with the aim of making a profit. For instance, you might buy a run-down property and renovate it, or buy a plot of land and develop it yourself. As with all speculative ventures, this type of work carries a significant financial risk.
If you intend to undertake any speculative work it would be advisable to conduct some market research into the state of the local property market.
Establishing the level of competition
Once you have decided who your customers might be, you need to find out how well they are already served.
How many other building firms are there in your area? A browse on Yell.com and other similar online directories will give you an idea of how many builders there are in your area. You could also look at local print directories. How many offer the same services that you intend to offer? Of these, which ones seem to be targeting the types of customer that you intend to focus on? These are your direct competitors. Bear in mind that there may be other builders working in the area who don't advertise anywhere - some of these may be 'cowboys' who operate outside the law.
Look at some of your competitors' advertisements and websites:
- what services do they offer
- do they advertise any special features, for example an insurance-backed guarantee
- do they belong to any trade associations, for example the Federation of Master Builders
- do they participate in the TrustMark initiative or another well known vetting and approval scheme
- what sort of impression does their advertisement give you (for example, does the firm come across as small and friendly, large and efficient, good value, upmarket?)
Grant-funded work
Some of your clients will be eligible for special grants to cover part of the cost of certain types of building work. You may be asked on a regular basis about the availability of grant funding for building work and it could be useful to find out about this from your local authority. Knowledge of how the grant application and payment process operates might also be an advantage when dealing with this type of work.
Health and safety in the building and construction industry
Building is potentially a hazardous activity. You must comply with workplace health and safety and fire safety legislation. You will need to ensure your keep up with health and safety regulations.
There are numerous regulations that could apply to your business including the Health and Safety at Work Act and the Construction (Design and Management) Regulations which specifically cover construction-based activities.
If you have employees, you will also have a duty to ensure their health and safety. If you have five or more employees, you must have a written health and safety policy. Some key areas of health and safety include:
- use of electrical equipment (power tools and so on)
- operation of plant machinery
- access to first aid equipment
- adequate provision and use of protective clothing and equipment
- reporting of any accidents at work
- working at height
Skills registration card schemes can enable you to show that your employees are properly qualified.
Insurance for your building and construction firm
The hazardous nature of the building and construction industry make adequate insurance essential. Depending on the nature of your business, the work you do and whether you have employees and company vehicles, you might require a range of cover including:
- employer's liability
- public liability
- contractor's liability/contractor's all risks
- unfixed materials, plant and equipment on site
- combined property
- business interruption
- motor insurance (for business vehicles)
- personal cover - accident and injury, loss of earnings and so on
When arranging your insurance cover, make sure you give precise details of types of activity that you and your staff will be engaging in as costs and levels of cover will vary.
Some professional associations and 'approved contractor' schemes require all participating businesses to have a minimum level of public liability insurance.
Research current trends, plus legal and tax issues
- Sector trends for builders
- Legal issues for builders
- VAT rules for builders
Decide which building services you will offer
Building work divides into two broad categories:
- new building work (for example house building)
- repair, maintenance and improvement (RMI) work (for example re-rendering, window replacement and loft conversions)
You might work on both new and existing buildings. Many small general building businesses undertake a range of jobs on domestic and other premises. Depending on the range of skills that you have, the resources available to your business and the type of work you decide to focus on, some of the types of work that you might carry out include:
- brick, stone and block work
- residential extensions, conservatories, porches, garages and so on
- loft conversions and dormers
- timber frame construction
- plastering, screeding and rendering
- patio laying, paving and concreting
- underpinning and subsidence remedial work
- general renovation work
- window installation
- damp-proofing
You may decide to specialise in a particular type of work, for example cavity wall tie replacement or fire and flood damage remediation. Perhaps you will decide to focus on using heritage building techniques to restore and maintain listed buildings. Maybe you will offer a specialist service such as whole-building 'facelifts' and remodelling projects.
Added value services
The building industry is very competitive and you may decide to offer your customers a range of attractive added value services. These might include, for example:
- free estimates and quotations
- insurance-backed guarantees on all new work
- membership of a recognised trade association
- a freephone telephone line
- a 'no job too small' promise
Other types of building and construction work
Depending on the skills that you and your staff have you may decide to offer a range of other services. You might, for example, take on roofing work, plumbing work, electrical work and carpentry yourself. Alternatively, you could team up with other local tradesmen. There may be other types of job that you are prepared to carry out if asked, for example landscaping, site clearance, painting and so on.
Your work rate
Assuming that you get a fairly steady stream of work, the amount you can earn depends partly on the number of days you work and the length of your working day.
You may decide to stick to normal business hours, for example 8.30 am until 5.30 pm Monday to Friday and perhaps Saturdays too. Or you may decide to work longer hours. Remember though that bad weather can disrupt your work schedules. Ideally you'll be able to organise things so that you're working inside when the weather's poor, and getting on with outdoor work when it's dry - but unfortunately things don't always work out like this. Perhaps you are prepared to work very long hours when the weather is fair and your services are in demand, taking some time off during quieter periods.
Bear in mind that noisy jobs may cause a disturbance for neighbours if you start work too early in the morning or continue late into the evening.
Work rate
As an experienced trades-person, you should have an idea how long certain types of jobs will take you. It is very important when quoting for a job that you can make an accurate estimate of how long it will take. It's no good quoting for three days work if it ends up taking you five!
The speed at which you work depends on your own skills and experience and on the type and standard of the work that you do. Your charges should reflect all of these things. Bear in mind that you may well be motivated to work hard and put in long days, but your employees and sub-contractors may not be prepared to match your work rate. You'll aim always to get the best out of them, but be realistic in your expectations.
Non-productive time
Unfortunately, not all of every working day will be spent earning money. Here are a few examples of reasons why you will sometimes find yourself working hard but earning nothing:
- visiting sites to cost new work
- finishing off jobs that take you longer than you had thought (possibly due to unforeseen problems)
- re-doing faulty work
- travelling to and from jobs, or to get tools or materials from a supplier
- repairing tools or vehicles
Sometimes you may find that you are unable to work at all, because:
- the weather is too bad to work outside
- you are waiting for materials to be delivered
- another contractor has fallen behind with their part of the job
- a vital tool or piece of equipment is broken
- you are ill
Take all of these factors into account when you are estimating the maximum number of productive hours that you can work each month.
Pricing building and construction jobs
How will you decide on your prices?
First decide how you will charge for the work you do. For example, you might:
- charge for your services on an hourly or daily basis, adding to this the cost of any materials you supply - perhaps with a mark-up percentage added
- base your charges for certain types of job on an area basis (a price per square or cubic metre for, say, a single story residential extension), plus any extra materials and services required
- work out a price for each job you're asked to quote for by calculating the cost of materials and making an estimate of the number of hours or days work involved
You may decide to use different methods of costing for different jobs, depending on who the customer is and what the job is like.
It is very important that you set your charges carefully. You must make sure when deciding on what to charge that, assuming you get enough work, you will earn enough to cover all of your operating costs, including your own drawings.
Also consider the following points when setting your charges:
- what do your competitors charge for similar work
- do you aim to win business away from your competitors with attractive pricing
- will you vary your rate depending on the type and complexity of the work involved
- will you make a profit on any of the goods and materials that you supply or purchase on customers' behalf, or will you pass these on at cost (the same goes for any sub-contractors' services you need to buy in)
Quote or estimate
If you give a quote for a job, that is a fixed price. Once it has been accepted by a customer the price can't be changed, even if there is a lot more work to do than you realised when you prepared the quote. So it's very important that your quotes give precise details of what is covered and make it quite clear that any variations or extras not covered by the quote will be charged for as extras.
An estimate is not a fixed price, it's just your best guess of what the job is likely to cost. You are not bound by it. It is perfectly acceptable to provide several estimates, each taking into account different circumstances from best to worst case scenario.
If necessary explain to customers what could lead to the price for a job having to change - for example unforeseen problems that need to be rectified, or extra features added to the specification. And if the customer asks for extra work to be done during the course of a job, be clear about how this will affect the overall cost.
It's usual to provide estimates and quotes free of charge on a no-obligation basis. You might, though, decide to make a charge for more complex and time consuming consultancy work - perhaps you will refund this charge if it leads on to a substantial contract.
Trade rates
Clients that are other businesses might expect you to offer them a special 'trade rate'. Large organisations that invite firms like yours to tender for contract work will also expect your rates to be very competitive, as will insurance companies.
Think carefully about whether or not scaffolding will be needed on a job, and be clear about whether your quote includes this cost. Health and safety legislation means that there are strict limits on the types of work at height that can be done off a ladder.
Be aware that many of your clients will get quotes from several building firms, so you need to be able to quote accurately and competitively. It takes time to do, but it can be well worth making the effort to cost out a quote accurately and in detail so that you can be sure it's competitive. However, don't cut your own throat. Many clients value good, efficient service and are prepared to pay a realistic price for it. Above all, make sure that you don't end up working at a loss because your quote was too low!
Special guides and software are available to help you when pricing all aspects of building work. They give up to date advice on what rates to charge for particular types of jobs. Many building materials suppliers will help you to work out what quantities you will need and the cost.
Promote your building business
It's important to advertise your construction business effectively, to let your potential customers know who you are, where you are and what you can do for them.
Many of your customers will not require building services regularly and may not have the name of a builder to hand. Some may never have engaged a builder before. For many customers, a telephone directory is the first port of call when looking for a professional tradesman.
Advertising and marketing
Now that so many people search for builders online, a good website can be a very good way of advertising your business and reaching a wider range of customers. Think about getting listed in online directories - perhaps 'contact an expert' directories run by some trade associations.
Social media can also be an effective way of marketing your business, staying in touch with previous customers and making contact with potential new ones. Think too about using relevant forums and perhaps a blog (although be aware that some forum websites ban blatant advertising in forum posts). You could sign up to a review website for trades-people such as Checkatrade. You could also consider trying to obtain work through job-referral websites like Mybuilder.com and Rated People too.
An entry in a local print directory can be an effective way of advertising your business. However, many of your competitors will have done the same so try to make your business stand out.
Some firms spend a lot of money on large, eye-catching display advertisements. You will have to decide whether to compete head on with these firms, or look for a different way of attracting customers. You could, for example:
- focus on your own unique selling point (USP) in your advertising material. This might be, for example, "25 years experience", "Family run firm" or even simply "Friendly, honest service"
- advertise in other ways. For example, you could distribute a paper flyer, plastic card or sticker with your business name and telephone number on it as part of a mail-shot that you do, perhaps in the early spring
- look into becoming listed by an insurer, specialist helpline or directory as an 'approved tradesman' (most of these organisations operate a quality screening process and some will only list firms that have been trading for at least two years)
- contact local residential landlords associations to enquire about being included in their suppliers guide
The important thing is to tell people as many of the good things about your business as possible in your advertisements, particularly things that distinguish your business from your competitors.
Other ways of advertising
Your local paper may run a regular 'contact the experts' advertising feature. Remember that your vehicle can be a very effective means of advertising if you have it sign-written and keep it clean and presentable. You might consider having a large sign to display outside places where you are working, and/or on scaffolding. Make sure though that your customer and other contactors have no objections before putting it up. Also be sure that it does not cause an obstruction or hazard.
Think about other ways of marketing and promoting your business. You could sponsor a local sports club or event, for example. Some builders keep an eye on local planning applications and send a flyer to applicants in case any who are project managing the work themselves might want to engage them.
Word of mouth
Word of mouth recommendations are very valuable to your business. Everyone has heard horror stories about 'cowboy' tradesmen who bodge jobs and swindle their customers - and they want to be sure that you're not going to do the same to them. You will have to earn your reputation through good, reliable workmanship - but even small things like being polite and considerate can pay big dividends. Make sure that any staff you employ are good ambassadors for your business too.
Buy an existing building and construction business
You might decide to buy an existing building business rather than start your own venture from scratch. Buying a going concern can mean that the products, customers, regular sales, staff, premises and equipment are already in place.
But buying a business can be a hazardous, expensive process unless you have the right skills and experience on your team, including legal and financial know-how. Establish the genuine trading and financial position, so that the price you pay for the business is not too high.