How to Start a Custom Home Building Business

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The right time to start a custom home building company is when you are ready to take charge of your career, you have the resources to begin and you have familiarized yourself with all the regulatory requirements you must follow. Successful home-building companies have sprung up during both recessionary times and in boom markets, though it may be easier to accomplish your goals when the real estate market is hot.

Begin Plan with Ending

Just as a new home is sturdier when the foundation is strong, a construction company business plan also is more stable when you develop it from the ground up. You can more accurately write your plan if you work from the end stages of your projects back to the beginning, according to the Professional Builder website. Start with the amount of profit you want to achieve and then plug in the major costs you’ll incur with each project, such as land and materials, what kinds of labor you want – such as subcontractors or direct-hires -- and where you can find savings, such as building in energy-efficient tax credits. The backwards process should bring you to the beginning of your plan that includes your mission, goal and financing sources.

Find a Client Base

Custom homes usually are not built on spec. Instead, you typically contract with a client first who comes to you with anything from a rough idea to finished plans. Unlike general contractors, who build production houses in large numbers, a custom home builder must first know where to find potential clients. One way to do this is to build relationships and work closely with an architectural firm, or network through your local home builder association, to find clients with the land and/or the resources to build the house of their dreams.

Shore Up on Requirements

Whether you’ve been running a general contracting firm or working for a corporate builder, as the owner of your own building company, you need to know which licenses you and your sub-contractors need for each job, and you must secure those licenses and permits before you can begin a job. Contact your state's building commission or home builder licensing body to find out what you will need. Also, secure a surety bond for each new job to provide the homeowner with protection in case you can’t finish a job or fail to perform as promised.

Ensure Worker Insurance and Safety

If you use all subcontractors, require each one to show you proof of liability and worker compensation insurance. Use a contract that spells out requirements of all your subs. If you hire workers directly, then you need to cover workers with appropriate insurance required by your state governing board. Set up your work site so that it complies with all OSHA standards for workplace safety and ensure that workers adhere to OSHA guidelines for issues such as hardhat adherence, storing tools, wearing goggles and other safety hazard prevention techniques.

References

About the Author

Linda Ray is an award-winning journalist with more than 20 years reporting experience. She's covered business for newspapers and magazines, including the "Greenville News," "Success Magazine" and "American City Business Journals." Ray holds a journalism degree and teaches writing, career development and an FDIC course called "Money Smart."

Photo Credits

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