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Expert Answers to Biz Questions

Listen in! Pick up some expert advice to a reader's question that we selected from CyberSchmooz.

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The Biz Question

I'm thinking about starting a female-owned construction company. I'm very interested in construction and love the work. I'm focusing on new construction and developments, but I really don't know where to start. I've spent years thinking about this and I want to think no longer. I want to try it. Does anyone have any advice for me in getting my feet wet?

Answer from our Guest Expert Lillyvette Montalvo

Starting a female-owned construction biz sounds like a great plan!

Business Plan: A Solid Foundation

Speaking about plans...have you developed a business plan yet? Business plans are a Terrific way to get you building in the right direction and getting you off to a solid, "concrete" beginning! Don't be intimidated; you can get assistance researching and writing your business plan -- free of charge -- at your local university's Small Business Development Center. Other organizations, such as SCORE, offer free assistance. They'll help you every step of the way and provide you with realistic numbers, a format, and advice.

Next, ask yourself a few initial questions that will help you focus on equipment and staff issues for your new venture.

  • Do you have experience in this industry?
  • Do you have persons that can work with or for you that have experience in this type of biz?
  • Would you be working from a General Contractor's or a sub-contractor's perspective?
  • Will you concentrate on one specific area of the "new construction and development" biz?

Consult with an attorney/accountant and decide which business structure would be best for you -- a corporation, limited liability company, or partnership? (Either way, make sure you're covered for liability.)

A Certification to Chew Over!

Good news! As a woman-owned business, you can apply to obtain certification that'll allow you to be on a list for various large corporations and state/federal entities who are seeking contracts with minority/female-owned businesses. Even better, the requirements are simple to understand and follow.

To find out all about the certification process and whether any private certifiers reside in your state, visit the Women's Business Enterprise National Council website.

Not all states have private certifiers, but we're working toward that goal. At the minimum, we'd like to get some certifiers to cover various states to assist other women in a positive and successful manner.

Working Capital Blues

What about working capital? You can't get started in any type of business unless you have the appropriate cash flow. If you've been doing enough research on the construction industry, you'll also know that it's extremely difficult to obtain a business loan for this business from your local bank -- young or established.

Most banks won't provide you with any type of business loan unless you've been in business for two to three years -- this will provide them with an established credit history on your business. Nevertheless, even after that, loans are hard to obtain, unless you have more than enough collateral.

Consider some of these financial options as possible solutions to your initial working capital blues. (Use some of these only a temporary basis.)

Use credit cards to purchase general office equipment, supplies, etc. If you can't pay off the balance within a reasonable amount of time, scratch this idea off of your list.

Friends, family, business partners. Choose your sources from this group very carefully. Again, make certain borrowed money is paid on a timely basis; you obviously want to maintain positive relationships with these folks. If you have a business partner, make sure you trust him or her implicitly and he or she adds strength to your company by having great experience in the field or having deep financial pockets.

Leasing equipment. This will let you take advantage of tax benefits while being able to have state-of-the-art office and industry-specific equipment. Don't forget you can also lease your office furniture! To obtain good rates, good personal credit is a must. If your credit is marginal, some leasing companies will work with you, but the rates will be slightly higher. Some leasing companies prefer that you have built up at least nine months in your industry before leasing to you.

You can also look to other sources that are willing to work with younger start-ups. For example, my company, Star Capital, Inc., tries to work with new and established businesses in this type of financing. Remember, though, the more time you have in business, the better credit you build -- both personally and in your business -- the more you can take advantage of leasing.

Progress billing funding. "Invoices" don't exist in construction, as I'm sure you know, just progress billings. You complete one step of the construction development, it's inspected, and hopefully, approved. Once that approval is there, you can bill your customer.

Nevertheless, you don't know how long it'll be before you get paid; although you may extend 30-day terms to your customers, some may not pay you until 45 or 60 days. This could be a huge negative impact, especially if you need to meet payroll or purchase additional inventory for the next step. All you need to have in order to take advantage of this is have credit-worthy customers (even if they take longer to pay you) -- therefore, you can be a very young business or an established business.

I hope this gives you some idea of the first few steps you need to take to start a successful construction business. Remember, owning your business is a lot of work, but it's the best work you'll ever do because it's for YOU!

Best of Success! Good Luck!

Lillyvette Montalvo

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