How to Start a Construction Company in Canada
The construction industry in Canada is a dynamic, competitive sector that can present entrepreneurs with both possibilities and challenges. There are multiple types of construction businesses, ranging from general contracting to highly specialized restoration. But what are the tips on how to start a construction company in Canada?
Fortunately, starting a construction company is easy, provided you know where to begin. Keep in mind that construction companies take time to plan and establish, and understanding the process will help you succeed. It will also help you avoid most new construction companies’ pitfalls.
Tips on How to Start a Successful Construction Business in Canada
1. Create a Business Plan
A construction company must have a business plan like any other new business. This will be your road map for staying organized and on schedule with your tasks. “If you fail to plan, you plan to fail,” so create a solid business plan that covers everything you need to accomplish to get your business off the ground. This plan can change naturally as the business grows, or you can revise it.
2. Register Your Construction Business
All businesses in Canada must register with the state and local governments to get a business registration number and a tax registration number, if applicable. You can register your construction company as a small business or incorporate it.
Registering your company demonstrates your commitment to running a legitimate and responsible business. It also shows that you are a professional and reputable business owner to your customers, partners, and suppliers.
Once you register an incorporation, for instance, in Ontario, it has no annual filings. The incorporation must file a yearly return to remain active in British Columbia, Alberta, Manitoba, and Saskatchewan. Annual returns usually differ from tax filings and are normally submitted on the company’s anniversary date.
3. Choose a Location
Choosing the location for your new construction company will depend on your needs. You may want to run your business from a home office, a rented or purchased facility, or both. Other things to consider include:
- Is the location easily accessible?
- Do you require more space for storage?
- Do you require a walk-in office that clients may walk into?
- Do you need space for machinery?
Even though your office’s precise location doesn’t matter much for a Canadian construction company, the geographical location is crucial. For instance, suppose your construction company is in a province or territory where the construction industry is expanding rapidly.
In that situation, it’s easier to get clients than in a region with a stagnant construction industry. So, before starting your business, consider the state of the local construction industry rather than just choosing a location close to your home.
4. Obtain the Necessary Licenses and Permits
There are certain licensing requirements for various skilled trades or types of construction in the Canadian building and construction industry. To find out what business permits and licenses you need for your new construction company, visit your local municipality or BizPaL.
Besides, to learn more about the regulations for construction companies in each province in Canada, check with the College of Trades or their equivalent.
Some common regulations that may apply to your construction business include:
- Certifications and specialized trades: You must possess a Certificate of Qualification, certifying that you have completed the necessary on-site training requirements or apprenticeship for your trade.
- You must have a license with a regulatory authority to operate as a builder or seller of new homes.
- Your construction projects must adhere to the regulations and standards.
5. Obtain Insurance
Having the necessary insurance policy when starting a construction company is essential. Insurance policies will protect your company’s property, employees, and clients from financial loss in the case of an accident, injury, or property damage.
For a construction company, you can opt for general liability insurance, property insurance, workers’ compensation insurance, builder’s risk insurance, unemployment insurance, professional liability insurance, and equipment insurance. Depending on the scope of your construction work, you may require additional business insurance.
6. Health and Safety Obligations
When registering your construction company, ensure you and your construction workers are protected by the law. Consider the occupational health and safety regulations recommendations of the Ministry of Labour.
Besides, the Canadian Federation of Construction Safety Associations (CFCSA) is an organization for provincial and territorial construction safety associations aiming to promote awareness of construction health and safety.
Even though you may not need to cover all these areas when starting, it’s still a good idea to familiarize yourself with them to know what to expect.
7. Source Funding and Financing
Canada Startups usually offers government funding and financing for contractors for businesses, making it quite easy for you to start your own construction business. There are multiple ways to get funding for your construction company, including small business grants and loans.
8. Join Industry Associations
As a new construction business owner, we recommend joining relevant trade associations, locally, regionally, and nationally, in the construction industry. You can join the Canadian Construction Association and the Home Builders’ Association.
Joining a trade association has many benefits, especially for a new construction business owner, including:
- Networking and exchanging ideas
- Upgrading skills or learning advancements
- Gaining regulatory guidance
- Maintaining and reinforcing best practices
9. Hire Contractors or Employees
Hiring contractors instead of full-time employees can be a good option for small construction companies because of the reduced paperwork and responsibility. Contractors in Canada don’t receive benefit packages or pensions and are responsible for their Canada Pension Plan contributions. Also, as a construction company owner, you don’t have to provide them with life insurance, health insurance, or other benefits.
Conversely, when you hire an employee, you can train the person on how you want the job done. Besides, you will develop a solid relationship with your employees since you are giving them employment, and this type of loyalty can lead to increased production.
10. Purchase or Lease Equipment
Having your own equipment allows you to manage how and when they are utilized and their maintenance. The equipment will always be available whenever you need it, allowing your employees and operators to become more familiar with the equipment, leading to increased production.
As a new construction business, purchasing equipment isn’t a good idea because of the higher upfront cost. On the other hand, leasing combines some advantages of renting and purchasing. Lease terms vary, although they are usually for a year or more. It is less expensive upfront since there is usually no down payment required, and it does not tie up credit lines.
Also, leasing allows you to upgrade to a new model every few years. Some leases have flexible periods or seasonal payments, allowing you to skip or pay less during sluggish months. But that doesn’t mean there are no disadvantages. For instance, leases tend to have higher insurance and interest rates.
11. Have a Marketing Plan
Your marketing strategy will determine how many new customers your construction company attracts. This is an important step if you’re just starting and haven’t yet built a reputation for yourself. Potential clients can find engaging you challenging if you lack expertise, but the right marketing plan can help change that.
We recommend doing market research before starting your construction business to help you understand the market and industry and show you how to create a successful construction business. Also, identify your target market by picking out your most likely customers and determining what makes them stand out from the rest of your prospective customers.
Furthermore, create a website that will give potential customers a sense of professionalism and inform them of your work. Besides, check the local industry publications to stay on top of trends.
Frequently Asked Questions on How to Start a Construction Company
1. How much does it cost to start a construction company in Canada?
When starting a new construction company in Canada, you must consider several one-time and recurring expenses. Starting a general contractor’s construction business can cost as little as $50,000 for small businesses and $500,000 for larger businesses.
Nevertheless, the most profitable construction business to start in Canada involves manufacturing since it targets the whole construction industry. These include ceramics, cement blocks, and fly ash bricks.
2. Can I start a construction company in Canada?
Yes. One of the first things you need when starting a construction business in Canada is a license to ensure the federal government and the Canada Revenue Agency recognize the business. You can register as a small business or become a corporation. Keep in mind there are advantages and disadvantages to each option.
Remember, contractors require licensing, which is usually regulated provincially. However, with a few exceptions, most provinces don’t usually require contractors to be licensed. For instance, Quebec has a complex scheme that requires all contractors to be licensed, while BC requires residential builders to be licensed.
3. Is construction in demand in Canada?
Yes, the demand for construction is expected to remain high. According to BuildForce Canada, the industry will need to recruit 309,000 new construction workers between 2021 and 2030, driven by the expected retirement of 22% of the current workforce.
Additionally, the fastest-growing sector in construction is the green or sustainable construction sector. Green building practices involve designing and constructing buildings with a focus on environmental sustainability, energy efficiency, and resource conservation. This sector is growing rapidly due to increasing awareness of climate change.
Feature Imge by Scott Blake on Unsplash