Licences and permits you'll require to start a construction business

People will always need things built – homes, commercial office parks, recreational centres. With this comes ample opportunities for those keen to establish a construction company. But – if the frequent news stories tell us anything, it’s that these opportunities are often also exploited by unscrupulous contractors providing shoddy work.

People will always need things built – homes, commercial office parks, recreational centres. With this comes ample opportunities for those keen to establish a construction company. But – if the frequent news stories tell us anything, it’s that these opportunities are often also exploited by unscrupulous contractors providing shoddy work.

What if you’re not unscrupulous, just ignorant?

Sometimes, you don’t intend skirting the rules, but you aren’t aware that you’re doing it. Today’s blog looks at all the licences and permits you’ll require if you’re interested in starting a legitimate construction business.  

10 steps to starting a business (any business)

Starting a business involves planning, making key financial decisions and completing a series of legal activities, which the following 10 easy steps will help you do.  

• Step 1: Create a business plan

• Step 2: Get business assistance and training

• Step 3: Choose a business location

• Step 4: Finance your business (find government backed loans, venture capital and research grants to help you get started)

• Step 5: Determine the legal structure of your business (decide which form of ownership is best for you: sole proprietorship, partnership, Limited Liability Company (LLC), corporation, S corporation, non-profit or cooperative)

• Step 6: Register a business name (‘Doing business as’)

• Step 7: Register for tax

• Step 8: Obtain business licenses and permits

• Step 9: Understand employer responsibilities

• Step 10: Find local assistance

Your 4 specific construction requirements

There are a few compliance requirements that you would need to get in place when starting a construction company.

1. You need to apply for your company registration with the Companies and Intellectual Property Commission (CIPC).
2. Once you have all the original company documents in place you can open a bank account and register with SARS for income tax, VAT (if it’s a business with an annual taxable income of more than R1 000 000 must to register for VAT) and employee tax.
3. There are a few associations that your construction company can register with such as the National Home Builders Registration Council (NHBRC). Construction companies registered with the NHBRC are recognised as reputable by the public sector and financial institutions.
4. If the public sector is part of your target market then you need to register your business with the Construction Industry Development Board (CIDB). The CIDB grades and categorises contractors according to their works and financial capability.

Other operational requirements that you should have in place are:

• a comprehensive HSE policy and a safe work procedure manual
• sufficient public liability insurance cover (the level of the insurance cover needed will normally be stipulated by the client).

How to avoid problems with vendor management

Once your business is up and running, one of the biggest challenges you may have to face during projects is difficulties with vendors or sub-contractors. To be fair, not all the potential pitfalls are the fault of vendors. But, if you follow these guidelines, working with vendors will become significantly less difficult and it will be easier to avoid the bulk of possible problems.

Guideline #1: Don't rely on status reports

Don’t simply rely on status reports. These reports provide only a glimpse of what is really happening. You need to investigate further to gain a proper understanding of the process. In other words, ask for status updates to determine for yourself where the project sits. This may mean more leg work, but it can help to guarantee on-time delivery.

Guideline #2: Give excellent requirements

Don't assume. When working with a new vendor or one that you've worked with many times before, it's incredibly important to have all of the requirements laid out on the table at the start of the project. A common mistake is not providing a full set of requirements that provide a clear understanding of what needs to be done, what the final product should be, and when it is due. Spelling it out to the vendor or contractor may seem like you don't trust them even if you've worked with them in the past. However, by doing so, you can reduce the risk that comes when a vendor says, ‘I didn't know that’. Unclear or incomplete requirements are one of the biggest issues managers face.

Tips to improve your vendor relationships

Improve the overall outcome of any relationship with a vendor by:

• setting up verification milestones that align with payments (this provides a clear understanding of where the project needs to be at each step in the process)

• aligning your expectations for vendors with the expectations your customers have (if you do not work with the very best professionals, you may be unable to meet customer demands)

• knowing when it is time to move on (don't keep working with a company or organisation that cannot meet goals. You are simply setting your business up to struggle in the long term).

Overall, proper vendor management can minimise the risks of any project going wrong. This does take time and effort to build successful relationships with vendors, but it is worth it for the health of your business.

Interested in our Legal Liability courses or Construction Regulations courses? Visit SafetyCloud for world-leading occupational health, safety, and environmental training in South Africa.

Sources:

http://www.entrepreneurmag.co.za/ask-entrepreneur/start-up-industry-specific-ask-entrepreneur/do-i-need-any-licenses-and-permits-to-start-a-construction-company/

https://www.sba.gov/starting-business/how-start-business/10-steps-starting-business

https://www.sba.gov/blogs/how-start-small-construction-or-general-contracting-business

http://www.brighthubpm.com/monitoring-projects/128333-avoiding-problems-with-vendor-management/