How to start a construction company in Australia

Many construction professionals look to creating companies to further their career aspirations and make their mark on the industry. Doing so is not necessarily easy however, and there are quite a few steps to go through to get to a point of having a construction company up and running. Here are the summarised steps you will need to go through to start a construction company.



Understand what you want from a venture


Many people go into forming organisations and companies without a clear idea of what they want out of it. What do you want to achieve? Is there a purpose for your company? How do you intend to make an impact, or even leave a lasting legacy? These are some of the important questions you need to ask yourself.


To begin a construction company and make it successful, you must be clear in your convictions. The vision you present is not solely for yourself, but for other stakeholders you wish to bring into the fold. They are the ones who need to feel and understand your desires for a construction company, and it is this vision that will bring more people to join your construction company. 


A good way to narrow this down is to analyse other successful construction companies you wish to emulate. You don’t have to copy them like for like, but you can take the best parts for inspiration and add your own input to build something long-lasting.


How to start a construction company in Australia








Conduct research into business feasibility


You may already have an idea of the purpose of your future construction company. But what good is this future without a clear understanding of reality in mind? When beginning a company, it is imperative to analyse the competition. The market has many components which affect the ability of your company to rise from the ground and gain favourable outcomes. 


For one, there might be barriers to entry. For example, the number of construction companies in your desired market may be too much or too low. If the former is the case, it could be that there is a monopolised market which is not easy to break through. A few construction companies may control the market and revenues which might make it difficult for new companies to grow. 


The opposite might be true as well. Too many construction companies in one market would mean over-saturation. Innovation is quickly stifled, as each company would take advantage of this innovation immediately. Projects completed are also homogeneous, which means that there is a lack of distinction and similar works are much more likely to exist. 


These are only a handful of the things you need to consider before beginning a construction company. It would be wise to complete research into all these areas to develop a path for entry. Investigate the current occupiers in the market; this includes their bread and butter of reliance, what kind of previous projects they have completed, how much works have sold for that they have completed, and what they charge for their services. Being proactive in these instances will help you to understand how to gain a foothold in your desired market.



Plan your objectives


Now that you know your needs for forming a construction company as well as the way in which you can be successful amongst a sea of competitors, you need to develop a plan of attack. In this case, a business plan. 


By failing to prepare, you are preparing to fail. This could not be more true when it comes to planning. Not having a concrete plan in place is a recipe for failure. This is especially the case with forming a construction company where there are many more things to take note of such as legal and financial implications. 


A business plan must be thorough and all-encompassing. You would need to take into account factors such as the structure of your company, the key people and the positions they will hold, the projects you will bid and engage in, cost and revenue flows, target markets etc. 


By already putting a plan in place for operation and continuous progression, you are only setting yourself up for the chance to have ongoing achievements. Failure to formulate a plan means these future wants will most likely never be realised.



Determine a business structure


The importance of this step cannot be overstated. A business structure is the way in which business exists and operates. There are many factors that go into determining the appropriateness of a particular business structure whether that be number of employees, revenues, costs and profits, ownership of the business etc. There are 3 relevant types of business structures for construction companies and they are as follows:


Sole trader: a sole trader owns the company themselves, as well as controlling and managing the business themselves. You are legally responsible for all aspects of the business. Debts and losses can’t be shared with other individuals.


Partnership: a partnership is a business owned by two or more people who have equal obligations amongst themselves. The partners share income, losses and control of the business. The partners in a partnership are not employees, but the partnership might also employ other workers.


Company: A company is a legal entity with higher set-up and administration costs. Companies also have additional reporting requirements. Companies have limited liability. One advantage of having a limited liability company is that you are only liable to pay back debts equal to the money invested and you are not personally liable as the company is its own entity.


Clearly, there are different structures of which you will need to wade through. How many employees do you need? Are you looking to bring others into the fold of management? When determining the right business structure, be sure to answer these points.







Register your company


Once you have a structure chosen, you will need to register your business. You must apply for an Australian Business Number (ABN) as well as a tax file number to officiate the process. You may also have an Australian Company Number (ACN) depending on the structure. 



Obtain appropriate licences


A company might exist but it needs licences to actually carry out construction work. There are a plethora of building licences to acquire. For example, you might need gas fitting, plumbing and electrical licences. Under these licences, you can perform specific works related to the jobs and frameworks of the licences at hand. Another example is heavy vehicle licences. These are important for slightly larger projects which as a company you would expect to engage in. 


Most if not all construction companies would require high risk work licences. High risk work is commonplace in construction and it would be a significant priority to obtain these licences. Examples of high risk work include scaffolding, crane and hoist work, forklifting and pressure equipment handling. 


One type of licence that might be overlooked despite its importance is a public land licence. The word “public” is key here. If the work affects the public in terms of needing to encroach on public property, then to avoid legal ramifications it makes sense to have this licence. For instance, a block of land might have certain heritage requirements that prevent works from being completed. 


The bottom line is that failure to obtain the appropriate licence will only result in hefty fines and endless legal papers. To avoid this, ensure that your construction company adheres to rules by having licensing. 



Develop financing structures


Projects do not magically appear on their own. You need money and resources. Whether this comes from your own pocket or someone else’s, it is something you will most definitely need to figure out to successfully get your construction company off the ground. Some are in the fortunate position of having reserves to pool from to begin operations. In many cases, this isn’t a reality. Common sources of financing include loans, investment from other parties, and government grants. Always take advantage of financial opportunities presented whilst having future costs in mind. 



Gain equipment and meet safety standards


You will also need equipment to conduct construction. Using funds mentioned in the previous section, you will need to acquire and manage inventory of materials, tools and machines efficiently. Depreciation is a concept that is foreign to some, but is very relevant to the construction trade. These material resources gain wear and tear over time, so it is important to not let them run down to a value of zero but rather sell them for better parts when the value depreciates to a point where they can still be sold for reasonable sums. 


Adjacent to this is safety. The construction industry has a distinct need for quality and safety, which each individual is required to abide by. Part of this involves having safe for use equipment, and always using Personal Protective Equipment (PPE) at all times.



Hire the right people


Bringing on board the right people for your construction company is truly the difference maker between companies that are successful and companies that are not. It is evident that Australia is facing a long term skills shortage in construction – but this shouldn’t be a deterrent. 


Low turnover is just as important as bringing people in. find ways to retain the best staff by any means necessary – whether that be bonuses, flexible work hours or perks. However, the true method to retaining staff is to build a strong work culture that seeks to take care of employees and foster stronger relationships but also innovation and challenging work as well. 


There are lots of other things you may need to consider to start a construction company in Australia, but these steps are the most critical to ensuring you can get off the ground running to running a successful construction company. 


Parker Brent is a provider of courses in building and construction. For more details, enquire here.