Whether your construction startup specializes in new construction, renovation or some other discipline, this is an opportune time for you. The construction business is growing. There are a lot of opportunities and ways to turn a construction startup into a successful business. In fact, here are five ways to help make a construction startup into a successful business.
Improved Cash Flow & Techniques to Apply For More Cash
There are a lot of theories on why construction company startups end up going bust within a couple years of operation, and cash flow is rarely mentioned, which is stupid for new owners not to be aware of it. Construction companies, perhaps even more than any other industry, needs a steady, large cash flow. Even a new company getting steady business orders will find itself liquidating equipment and building supplies as it goes out of business if there is not cash on hand to carry out unexpected orders, services or fill new component orders. Additionally, creditors will not care how much you are worth on paper if your money is tied up in excess inventory, unpaid accounts receivable or accounts payable.
Now that you know why you need a strong cash flow and cash ready to spend, there are ways to improve the cash situation. First, you should get deposits up front, and you need a deposit before requisitioning materials or anything, not just before breaking ground. Next, you should shorten the client's payment terms. Then, renegotiate repayment terms with creditors and begin converting accounts receivable to cash. Finally, try being flexible in what forms of payment you accept. All of these factors has the potential to improve your cash situation significantly. The better cash situation you have, the more it will make your startup stronger, become a growth catalyst, and give you peace of mind.
Until recently, there was hesitance and little utilization of ERP software for the construction industry, but now larger, established construction companies and smart startups are using Enterprise Resource Planning software to connect all of their departments, and according to ContractERP, the software can be used to connect, construct and manage a myriad of things like doors, windows, commercial equipment, security and much more. The decision to use ERP software by startups and established construction companies has been a contributing factor to far better efficiency, growth and financial success.
This is a tech move startups should use immediately. First, GPS tracking will help improve inventory control. Additionally, insurance companies will give better rates for companies utilizing this technology because it is effective in recovering stolen equipment, tools and materials as quickly as they go missing. If GPS tracking improves inventory control, helps recovers stolen or misplaced equipment almost immediately and drastically improves the price on insurance premiums, then it is a smart, long-term investment, and a key to making a startup successful.
Multiple Certification Collecting
This is a form of marketing for a startup. Beyond a contractor getting licensed for themselves and their startup, which is required but many do not do to save money on the front end, is to figure out how to stand out from their competition. If a startup wants to sell itself more effectively to clients, especially during bidding wars, the best way is show prospective industry credentials, especially unique ones. This will also reduce the need to give everything away in terms of lowering price to the point of barely breaking even.
There are interesting ways to become more appealing to clients and build an interesting list of credentials now too. A big trend in construction is reducing energy consumption, which is what people now call "going green", and in construction, it is finally profitable, especially for a startup. There are a variety of specialties besides energy reduction to get certified in. For example, a startup can gain many new clients by becoming a HERS Rater and becoming LEED certified. One of the most important certifications for a startup to prove itself to clients is to get a certification from the Building Performance Institute. Finally, here is a handy guide for startups to learn about and how to get specialty certifications to grow more successful.
A Fleet of Drones
Here is another piece of futuristic technology that will turn a construction startup into a successful business. First, a lot of contractors and project managers are unaware that drones can be used above a below ground. They can be used to survey the structural integrity of a building and search for damages on the surface faster and safer than a team of people. Also, they can be used below ground to check for pipe damages and to check the structural integrity of the foundation without sending human beings below ground. They save time, labor costs and increase safety. Being able to finish tasks faster, cheaper and lower the risk of lawsuits and workers' comp premiums will quickly help a startup's success.
There are more ways to contribute to a startup's success, but these five cover a lot of territory. They handle everything from making the financial foundation stronger to utilizing pieces of technology that is changing the face of construction. Finally, start with improving your cash flow and using ERP software, so it is easier to integrate, manage and finance other tactics to turn a construction startup into a successful, established construction empire.
I hope you enjoyed this article about tips entrepreneurs and managers need to consider when building a business.
Interested in more articles about building your business?
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- Tips To Build Your Business From The Ground Up
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Published by Michael J Schiemer
Owner of Bootstrap Business
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