Construction Business Plan Template
Whether you want to start your own construction business or expand an existing one, you need a business plan. The following construction business plan template lets you know what elements you need to include in a successful construction business plan.
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To ensure your construction business success in this highly competitive market, you need a properly structured construction business plan template. With over 12 years of experience, we have helped over 5,000 entrepreneurs create business plans to start and grow their construction businesses. Using the following construction business template, you can put together an effective business plan for construction.
Things to Know Before Writing a Construction Business Plan
According to the IBISWorld Construction industry report, the commercial building construction industry stands at $223.3 billion. The industry has experienced a shrinking of 1.9% from 2017-2022. However, the forecast is positive and the industry is expected to grow at 2.1% from 2022 to 2027.
The increasing unemployment and bad operating conditions decreased revenue. The industry is in a recovery phase and new businesses are entering the market. Covid-19 put a significant dent in the supply chain of construction materials which contributed to the construction material prices increase.
The commercial building construction industry makes a profit of $5.8 billion which has also experienced a decrease of 8.1% for the past five years (2017-2022). The profit margin in the commercial building construction industry is 2.6%.
About 64,465 businesses are working in the industry. The number of competitors has decreased steadily at the right of 0.8%. It is expected that the industry will not get many new entrants in the coming five years either (2022-2027). This is partly because of the shrinking profits, high barriers to entry, and high competition.
The commercial building construction industry offers 234,000 employment opportunities. As the industry faced a depression due to COVID-19, the number of employees decreased by 1.3%. The forecast is promising with growth for jobs at 1.3%. The industry pays $19.9 billion in wages.
The commercial building construction industry offers the following products and services.
- Design, bid, and build contracts
- Design and build contracts
- Integrated product delivery contracts
- Construction manager at risk contracts
- Construction management agency
Key Success Factors for Construction Business
These are the key success factors for the commercial building construction business.
Operations Visibility: Commercial building construction firms have complex organizational structures. Many times, different departments of a construction company work without much coordination. This creates management blank spots and causes ill-informed decisions.
This low visibility in the operations of a construction company also creates knowledge silos where one department does not share knowledge with other departments reducing organization efficiency, problematic collaboration, employee dissatisfaction, and decrease in turnover.
You can solve the problem of operation visibility by holding knowledge-sharing meetings and project meetings where all departments can align with the organizational goals.
Embrace Technology: Construction companies see the use of technology as an expense and not as an investment. Thus, a large number of construction firms are using spreadsheets as their most-advanced technology tool. However, a lack in the use of technology is adding to the inefficient use of time, wasted resources in record keeping, slow business processes, and more.
Currently, the construction industry is spending only 1% of its total revenue on technology. Old employees prefer the business process they are used to and they resist technology. If the adoption of technology can be made interesting and less time-consuming, coupled with relevant training for the staff, construction industry companies can adopt the technology. Technology can increase productivity, more control over projects, and save costs in the long term.
Manage Complexity: Construction projects are already complex and the modern architecture requirements have made them even more complex. Some complexity comes from subcontracts, multiple locations, inexperienced staff and contractors, and accidents.
The use of technology and better communication can remove complexity, increase productivity, and increase profitability.
Less Documentation: You need documentation for only two purposes, managing projects and resolving disputes. You can drop other documentation. It will help you save costs.
Avoid Litigation: The construction industry is prone to litigation. A whopping 71% of the large construction companies spend over 1 million per annum. Good documentation helps you win in court.
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What is a Construction Business Plan?
A construction business plan is a road-map for starting and growing your construction business. Your business plan outlines your business concept, identifies your target customers, presents your marketing strategy, and details your financial projections.
Any bank or investor you approach will require a construction business plan, so putting one together will be critical to securing funding.
In short, writing a business plan can help you succeed if you’re thinking of starting a construction business or pitching to investors or venture capitalists.
Why You Need a Construction Business Plan
Construction business plans can be used to gain interest from potential investors or to secure loans from banks. They are also helpful to you as the owner. A construction business plan allows you to thoroughly analyze every aspect of your potential business.
A solid, detailed plan gives you a clear path to follow, forces you to examine the viability of a construction business idea, and may help you better understand your company’s finances and competition.
Construction business owners who have a business plan grow 35% faster than those who don’t, and 75% of fast-growing businesses have one.
A construction business plan is a living document that should be updated annually as your company grows and changes.
Free: Business Plan Examples
Do you need help creating a business plan? Check out these six free, proven business plan examples from different industries to help you write your own.
Funding Sources for Construction Business
A construction company is a high-investment business. We will first rule out bootstrapping and friends and family money as these will be mostly insufficient for starting a construction company business.
Construction companies attract large lenders and a variety of loans. These loans range from funds for buying heavy equipment, wages for labor, and everything in between.
Commercial banks offer business financing for construction companies. Start your search with a traditional construction loan. When you have a large project and you can give the bank at least a 10% downpayment of the loan amount, chances are you will be able to secure the loan.
These are some of the banks that offer loans for construction businesses.
- Wells Fargo
- Chase
- U.S. Bank
- Bank of America
Savings and Loans Associations loans are good for smaller loans. If you are not into large contracts, an S&L loan can provide dependable financing.
SBA also offers loans for the building and construction industry. The SBA 7(a) loan program offers long-term financing for construction businesses. These loans can be used for equipment, supplies, building material, and wages.
If you are interested in getting an SBA loan for your construction business, our consultancy service for SBA loans can help you.
Veteran, women, and ethnic minority owned businesses may also get grants for the construction business. Check all details about business grants here.
How to Write a Construction Business Plan
To write a construction business plan, you don’t need to be an expert. Our step-by-step guide will show you how to write a construction business plan, or you can just download our proven sample business plans to get a better idea.
Executive Summary
The executive summary is the most important part of the document since it outlines the whole business plan. Despite the fact that it appears first in the plan, write the executive summary last so you may condense key concepts from the other nine parts.
It’s a part that catches the investor’s eye and provides key information about your company’s overview and upcoming short- and long-term goals.
Tell them what kind of construction business you have and what stage you’re in; for example, are you a startup, do you have a construction company that you want to expand, or do you have a lot of construction businesses?
Finally, an executive summary should provide investors with a preview of what they may expect from the rest of your document.
- Provide a high-level overview of the construction industry
- The name, location, and mission of your construction business
- A description of your construction business, including management, advisors, and a brief history
- Discuss the type of construction business you are operating, Give an overview of your target customers., and how your company differs from competitors in the industry
- Create a marketing plan that describes your company’s marketing strategies, sales, and partnership plans.
- And give an overview of your financial plan
Check out these executive summary examples to help you write a perfect one for your construction business plan.
Free: Executive Summary Examples
An executive summary is the most important part of your business plan, and it need not be challenging to write. This is why we have put together some awesome free Executive Summary examples for you.
Company Analysis
- Company summary:
- Company history: When and why did you start your construction business?
- What milestones have you achieved so far? Among the milestones might be the construction projects, growth year over year, an amount of revenue or profit, etc.
- Legal structure and ownership: Do you have S-Corp status? Is it an LLC? A sole proprietorship? Describe your legal structure.
- Mission statement: An overview of your construction business guiding principles. Learn how to write a perfect mission statement.
Industry Analysis
Provide a brief overview of the construction industry in your industry analysis. This may seem unnecessary, but it serves multiple purposes.
First, researching the construction industry will educate you. It gives you an understanding of the market in which you are operating. Secondly, market research can improve your strategy, especially if it identifies market trends.
Third, market analysis shows readers you are an expert within your field. Conducting research and presenting it in your plan is the most efficient way to accomplish this.
Industry analysis can be presented as a 8-step process when written as part of a company’s business plan.
- Give a quick overview of the construction industry. Define the construction business in terms of size (in dollars), historical background, service region, and products.
- Examine previous trends and growth patterns in the construction industry.
- Identify the market’s major competitors.
- Age, gender, and general lifestyle of the targeted market
- Determine the factors that have an impact on the construction industry. These might include government regulatory rules and other businesses’ competitive activities.
- Using research data, the industry forecast expected growth over the next five to ten years. Predictions should be made for both the long and short term.
- Describe how your construction business intends to position itself in the industry. Concentrate on how your construction business can benefit from opportunities highlighted in the industry.
Customer Analysis
The customer analysis section is an important part of any construction business plan since it evaluates the consumer segments that your company serves. It identifies target customers, determines what those customers want, and then explains how your construction services will meet those requirements.
Depending on the type of construction services you are offering, customers can be categorized into the following segments:
- People looking to build homes
- Residential property investors
- Businesses looking to build a commercial building
- Government contracts
- Home Renovation customers
Customer analysis may be divided into two parts: Psycho-social profiles (why your construction services suits a customer’s lifestyle) and Demographic profiles (descriptions of a customer’s demographic qualities).
With regards to demographics, include information about: the ages, genders, locations, and income levels of your customers. When targeting businesses, describe what kind of business, size, and location your target customers are.
The psychological profiles of your target clients reveal their wants and needs. The better you understand and identify these demands, the better your chances of attracting and retaining customers will be.
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Competitor Analysis
It is necessary to do a competitor analysis. Because you may use their data to define your goals, marketing plans, tactics, new product lines, pricing, and more. Use competitor analysis to:
- Identify the strength and weakness of your construction business competitors.
- Search for opportunities to distinguish your construction business from competitors.
The first step is to determine who your direct and indirect competitors are.
The direct competitors consists of other construction businesses that offer essentially the same services to the same people as you do.
Indirect competitors are other construction options that people have in addition to direct competitors. People selling turn-key properties, websites offering construction business listings and comparison, real estate listing websites, etc.
Once you’ve identified the competition, concentrate on the direct, head-to-head competitors, since they are the most threatening to your construction business— but keep an eye on the indirect competition as well, just in case.
Provide an overview of each direct competitor’s business and detail their strengths and weaknesses.
You will be able to position yourself competitively in the market if you perform proper competition research. Perform a SWOT Analysis to learn your competitors’ strengths, weaknesses, and competitive advantages in the following areas:
- Prices – Are they offering cheaper construction services or more costly than you and other competitors, what value do buyers get for that price?
- Quality – Are they offering premium construction services, the perceived worth in the eyes of the customers
- Customer service – How they respond to their consumers, whether they treat them poorly or well, and the degrees of satisfaction customers show
- Reputation — The sum of everything mentioned above: their credibility, how loved the brand is, and the loyalty of their customers
The final section of your competitive analysis should include a list of your areas of competitive advantage. for example: the range of construction services you will offer, the scope of each construction project, free estimate for very small projects, different types of construction contracts, etc.
Consider how you will outperform your competitors and include them in this portion of your construction business plan.
Free: SWOT Analysis Examples
Take advantage of our free SWOT analysis examples. Make your business future-proof by identifying your strengths, weaknesses, opportunities, and threats using this free SWOT Analysis Template.
Marketing Plan
Creating a marketing plan for a construction business involves identifying the target demographic and offering services that suit their preferences.
As part of your marketing plan for a construction business, you should include:
Pricing and Product Strategy
Your construction business must offer construction services that are different, unique and eye catching from those of your competitors. Research what your competitors offer and how they price their construction services. Construction services that are innovative and competitive identifies your construction business as the place to go for unique services and differentiates it from others.
Placing and Promotions
Place refers to the location of the business office of your construction company. Describe how your location might attract customers. As an example, Is your construction company office close to real estate investment firms, or near to a developing area or a growing suburb,
Promoting your construction business is the final part of your marketing plan. In this step, you document how you will drive customers to buy your services. A few marketing methods you could consider are:
- Pre-Opening Events
- Real estate investment groups
- Networking with Real Estate Agents
- Social media marketing
- Get referrals from current clients
- Optimize your Google My Business listing
- List your business on industry-specific sites
- Community Outreach
You should also think about your construction company’s Unique Selling Proposition (USP), which should explain why clients should choose you over other construction businesses. Ensure that your USP is reflected in your marketing.
Read Later: How to create a marketing plan in a business plan.
Operations Plan
While the previous sections described your goals, your operational plan in a business plan discusses how you will achieve them.
An operations plan is helpful for investors, but it’s also helpful for you and employees because it pushes you to think about tactics and deadlines.
Your operations plan should be divided into two individual parts, as seen below.
Your daily short-term processes include all the tasks involved in running a construction business, including hiring and training employees and administering the business. etc.
Your long-term goals are the milestones you hope to reach. It may include the date when you hope to lease the facility or remodel the facility: or when you hope to reach $X in revenue.
Management Team
The management team section in a business plan‘ outlines your management team, staff, resources, and how your business ownership is structured.
This part may be easily organized by dividing it into the following points:
- Ownership Structure
- Internal Management Team
- External Management Resources
- Human Resources
Ownership Structure
This section outlines your construction business’s legal structure. If your company is a sole proprietorship, it may simply be one phrase. It might be longer if your company is a partnership or a corporation. You should make it a point to clarify who owns what part of the business.
Internal Management Team
This section should not only outline who is on your management team but also how each person’s skill set and experiences will contribute to the growth of your construction business. Ideally, you and/or your team members have direct expertise in the construction business. If this is the case, highlight your experience and skills.
External Management Resources
Think of these external management resources as your internal management team’s backup. Consider forming an advisory board if your team is lacking expertise and experience with construction business.
An advisory board would consist of 3 to 7 people who would serve as mentors to your construction company. They would assist in answering queries and providing strategic direction.
If necessary, search for advisory board members with expertise running construction business.
Describe all of your company’s external professional advisers, such as accountants, bankers, attorneys, IT experts, business consultants, and/or business coaches.
Human Resources
The final topic to consider in the management area of your construction business plan is your human resource needs.
Financial Plan
As part of your financial plan, you should present a 5-year financial statement broken down monthly or quarterly for the first year, and then annually. Financial statements include your income statement, balance sheet, and cash flow statement.
Income Statement
A profit and loss statement is more commonly called an income statement. It shows your revenue and subtracts your expenses to determine whether you were profitable or not.
As you develop your income statement, you need to develop assumptions. For example, will you serve 12 clients in a year or 24, or even more? Will you prefer larger contracts even if you have to wait for them or you will sign contracts if they seem like a great fit? Will sales grow by 2% or 10% per year?
Your choice of assumptions will greatly impact your business’s financial forecasts. Conduct as much research as possible in order to ground your assumptions in reality.
Free: Income Statement Template
Create a financial statement for your business by downloading our free income statement templates.
Balance Sheet
While balance sheets include much information, to simplify them to the key items you need to know about, balance sheets show your assets and liabilities.
The balance sheet shows your construction business’s net value at a specific point in time. It categorizes all of your company’s financial data into three categories:
- Assets: Tangible goods with the monetary worth that the company owns.
- Liabilities: Debt owing to a company’s creditor.
- Equity: The net difference when the total liabilities are subtracted from the total assets.
The equation that expresses the relationship between these financial data elements is Assets = Liabilities + Equity.
Create a pro forma balance sheet for your construction business plan that highlights the information in the income statement and cash flow projections. A balance sheet is normally prepared once a year by a company.
Balance sheets indicate your assets and liabilities, and while they contain a lot of information, they are simplified to highlight the most important things you need to know.
For example, spending $200,000 to build out your construction business will not result in instant revenues. Rather, it is an asset that should help you earn money for many years to come.
Similarly, if a bank sends you a check for $200,000, you do not have to pay it back right now. Rather, that is a liability that you will repay over time.
Cash Flow Statement:
Your cash flow statement will help you determine how much money you need to start or grow your construction business. In developing your Income Statement and Balance Sheets be sure to include several of the key costs needed in starting or growing a construction business:
- Design fees, construction, and other costs associated with location development.
- Cost of equipment like display cases, computers, and software
- Staff payroll or salaries
- The total cost of insurance coverage (general liability, workers’ compensation, and property casualty)
- Start-up inventory costs
Pro Tips: Learn how to write a financial plan in a business plan to help you write a winning construction business plan.
Free: Balance Sheet Template
Create a financial statement for your business by downloading our free balance sheet templates.
Appendix
List any additional material you cannot include elsewhere, such as resumes from key employees, licenses, equipment leases, permits, patents, receipts, bank statements, contracts, and personal and business credit histories.
Attach your full financial projections along with any supporting documents that make your plan more compelling in the appendix.
Bonus Tip: Learn how to write a business plan appendix for your construction business.
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Summary of the Construction Business Plan
A construction plan is a worthwhile investment. As long as you follow the template above, you will become an expert in no time. By following the template, you will understand the construction business, your competition, and your customers. The plan will help you understand the steps necessary to launch and grow your construction business.
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Since 2010, Wise business plans’ MBA professional business plan writers has developed business plans for thousands of companies that have experienced tremendous success.
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