Preferences and freedom: The perils and challenges in starting a new construction business

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It isn’t easy to get started in the construction business. If you are thinking of starting from scratch, especially in the ICI world, be ready for a slog unless you have some established relationships and clients ready to go.

Can we learn some secrets of business success at general contractors’ association meetings? Well, if you are thinking of “success” like the diet fad pills or the “make money fast” internet scams, you’ll likely be disappointed. This is not an easy business and anyone starting out quickly discovers how challenging it is to get established, especially when dozens of competent contractors compete for the smaller projects that would be within a new business’s financing and bonding limits.

Unless the new business entry has some special contacts, relationships or exceptional experience, there are two sources for business opportunity: Public, open bid projects and admission to selection or rotation lists for smaller-scale public projects.

In the former, of course, the competition can be insane, especially if the work is for a straightforward building project without any special or exceptional qualifications. In the latter, you need to go through the hoops to be put on the qualified list and then hope your turn comes up for the invited quote — and then you still need to be “low” among the three or five selected contenders. Good luck!

(In the US, there are some advantages if your business belongs to one of the qualifying small-business minority/special priority categories — then, if you can combine the right accreditations and qualifications you may have a worthy edge in competing for public work, but of course, in many markets, there are plenty of competitors with the same advantage. And if you are a start-up without these advantages, you are doubly hit because your opportunities are even more constrained than they would be otherwise.)

How do you overcome these barriers? From experience, I’ve seen that early adaptor players slog it out — often virtually starving as they await their first opportunity, or worse, take it and discover the weakness of their margins. In fact, the failure rate is daunting (and this explains why many owners want to avoid the free-for-all public bidding environment; the “low bid wins” situation invites job site chaos, confusion, possibly missed deadlines and sometimes sub-standard work — better to stick with the old timers the owner knows and trusts.

Usually, the winners, the ones who survive, combine plenty of experience, determination, some credible contacts, and in the most favorable circumstances, some clients they’ve been able to (legitimately) carry forward from their previous employer. (The previous employer in some cases contracts with them as subcontractors or consultants; certainly possible for MBWE businesses in the US.)

I admire anyone with the balls and gumption to start a construction business from scratch. It ain’t easy — and if someone in that situation seeks marketing guidance from me, I would advocate they look at their existing relationships, connections, special expertise and alliances — and build as many of these as possible within the rules of integrity and contract law (ie non compete or non disclosure clauses with current/former employers) before starting out. It will be a tough fight once you open your doors.

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