Starting a construction company requires significant upfront investment, which can be overwhelming for new business owners, especially since costs vary by state, construction type, and company size.
Legal registrations, licensing, insurance, equipment, payroll, and marketing all come with their own price tags.
Below, I break down how much it costs to start a small construction company and provide expert tips on keeping numbers manageable.
Key Takeaways
- Filing fees, contractor licenses, and liability insurance can total several thousand dollars annually, but they’re essential for legal compliance and client trust.
- Solopreneurs can often start their businesses for $7,000–$15,000, while small construction teams typically need $25,000–$70,000 or more to cover compliance, equipment, and payroll.
- Buying used equipment, subcontracting specialized work, and using affordable tools like Connecteam for staff and project management can significantly reduce early expenses.
Construction Company Costs
Business registration & licensing
Before a construction company can take on its first project, it must be legally established and properly licensed to operate. These early compliance steps vary depending on the state, municipality, and type of work you plan to perform, but they represent unavoidable startup expenses. They’re essential for avoiding fines or project delays.
Legal structure costs
Before you can legally operate a construction company, you must register your business entity—most commonly as a limited liability company (LLC) or a corporation. This provides legal protection for personal assets and creates a more professional standing with banks, suppliers, and clients.
General assessment of costs:
The cost to register your business varies by state. Filing fees generally fall between $35 and $500. Some states also charge annual reporting or franchise fees, which increase long-term costs.
Specific examples:
- In California, filing an LLC costs $70.
- In Texas, the same filing costs $300.
Licensing
Most states require contractors to hold a general contractor’s license to operate legally. Specialty contractors (like electricians or plumbers) may also need separate trade-specific licenses. Licenses ensure contractors meet safety, competency, and insurance requirements.
General business licenses may also be required by your locality or state.
Did You Know?
You can store documents—like individual licenses—in Connecteam and set expiration date reminders. This way, you can keep everything up to date.
General assessment of costs:
Contractor license applications and exams have a vast cost difference, ranging from $50 to $1,050, depending on the state and license type. The average in the US is around $225.
Business license costs vary by location and type, with fees set as a flat rate or based on factors like revenue or staff size.
Specific examples:
- In Idaho, it costs $50 for an individual or business contractor’s license.
- A combined general commercial and residential license in Arizona costs $1,050.
- The cost for a general business license for new businesses in Seattle was $68 in 2024.
Permits & local fees
In addition to state-level licenses, local governments often require contractors to obtain permits and pay local business fees. These include zoning and building permits.
General assessment of costs:
Permit costs vary significantly by jurisdiction and project type, ranging from $50 for a basic local operating permit to $3,000 or more for complex building or zoning approvals.
Specific example:
- Larger urban jurisdictions may require multi-thousand-dollar fees for building permits on commercial projects.
Did You Know?
Getting these initial costs clear in your mind is the first step in understanding construction business profits.
Insurance & bonding
Insurance is one of the most important things you’ll need when starting a construction company. It protects you from financial loss in the event of accidents or claims and is required by many states and by some clients before they award contracts.
General liability insurance
General liability insurance protects your business if a third party suffers property damage or bodily injury as a result of your work.
General assessment of costs:
The best price we found for small construction companies is $82/month. Your price will depend on your company size, location, and risk level.
Specific examples:
- As construction falls under the umbrella of “higher-risk industries,” construction companies can expect to pay $100–$200/month in Texas. Companies handling commercial jobs will pay towards the higher end of this scale.
Workers’ compensation
Workers’ compensation insurance covers employees’ medical expenses and lost wages if they’re injured on the job. It’s required in most states once you hire staff. Because it’s related directly to the number of workers you have, the costs are typically a percentage of your total payroll costs.
General assessment of costs:
Premiums vary widely since they’re directly linked to your total payroll and the type of construction work.
Specific examples:
- In Texas, construction companies can expect to pay $2–$5 per $100 of payroll.
- A roofing company with higher injury risks could see costs at the upper end of the range.
Pro Tip
Use apps like Connecteam to make it easier for workers to follow safety protocols and reduce workers’ compensation claims. Connecteam comes with features like digital forms for creating safety checklists and incident reports, along with employee task tracking to ensure workers are carrying out compliance tasks.
Get started with Connecteam for free today!
Surety bonds
A surety bond is a financial guarantee that ensures contractors fulfill their obligations. It’s often required by licensing boards and for public project bids.
General assessment of costs:
Premiums are typically 1–3% of the bond amount, translating to $100–$1,000 annually for most small contractors.
Specific examples:
- In California, contractors must hold a $25,000 license bond, which costs about $125/year for qualified applicants.
Vehicle/equipment insurance
Construction companies need commercial auto and equipment coverage for trucks, vans, and machinery.
General assessment of costs:
The average premiums for commercial vehicle insurance are $173/month, with equipment insurance costing, on average, $14/month.
Specific example:
- A small fleet of trucks and trailers could cost $4,000–$5,000 annually.
Equipment & tools
From basic hand tools and supplies to heavy machinery, company trucks, and software, these costs can vary dramatically depending on the type of work you plan to do.
Basic tools
Every construction company needs hand tools, power tools, and safety gear. This list of tools gets longer and more specific for each type of construction company. Let’s take a look at the average costs for the basics.
General assessment of costs:
Expect to spend $1,000–$5,000 for a starter set of tools and personal protective equipment (PPE). This figure is based on current prices.
Specific examples:
A new general construction contractor might purchase drills, saws, levels, hammers, and safety gear for around $2,000.
Heavy equipment
Not all companies need bulldozers, excavators, skid steers, and backhoes, but they’re critical for larger projects.
General assessment of costs:
Purchasing can run $10,000–$50,000+, though renting is often more affordable.
Specific examples:
A skid steer costs $25,000–$30,000 new, while daily rentals average $300–$500.
Vehicles
Pickup trucks or vans are needed to transport workers, tools, and materials to job sites.
General assessment of costs:
Work vehicles cost $5,000–$30,000+, depending on whether they’re used or new. This range is based on the current prices of secondhand construction vehicles.
Specific examples:
A used work truck may cost $7,000–$10,000, while a new heavy-duty pickup can exceed $25,000, according to auto-selling websites.
Software & tech tools
Project management, time tracking, and payroll software are essential for modern construction companies wanting to streamline business operations.
General assessment of costs:
Expect to pay $500–$2,000/year for most software subscriptions, though you can find software with free trials or even free plans.
Specific example:
An all-in-one construction app like Connecteam can manage scheduling, communication, job reporting, and more, and costs are extremely affordable. There’s even a free-forever plan for teams of up to 10 users, making it a highly economical option for both solopreneurs and small teams.
Labor & payroll setup
Hiring and compensating employees is one of the most significant recurring expenses for construction companies. Even if you start as a 1-person operation, preparing for payroll, taxes, and compliance will help you scale smoothly once you bring on your first crew member.
Initial hiring
The upfront costs of bringing on employees include recruiting, training, and initial wages.
General assessment of costs:
Hiring just a few workers can cost $3,000–$10,000 in wages during the first month or two.
Specific examples:
A small residential contractor bringing on 2 laborers at $18/hour each will spend around $5,700 in the first month of payroll.
Payroll services
Payroll services ensure employees are paid accurately and on time while handling withholdings and compliance requirements.
General assessment of costs:
Payroll software or outsourced services typically cost $30–$100 per month plus $2–$5 per employee.
Specific examples:
A new business can expect to pay $40/month + $6/employee for payroll using Gusto (contractor-only businesses will pay less).
Employment taxes and benefits
Employers must pay federal and state payroll taxes, plus benefits like health insurance or retirement, depending on your local state laws and business type and size.
General assessment of costs:
Taxes and benefits typically add 15–40% on top of base wages, depending on the state you live in.
Specific examples:
For a $50,000 payroll, employers should budget an additional $7,500–$15,000 annually in taxes and benefits.
Office, shop, or storage costs
Running a construction company requires some kind of base for operations, whether that’s a small home office, a rented commercial space, or storage for vehicles and equipment. The costs in this category vary greatly depending on your setup.
Home office setup (for solopreneurs)
A home office allows solopreneurs to manage schedules, finances, and communication without renting a separate space.
General assessment of costs:
Most solopreneurs can set up a home office for $200–$1,000, depending on furniture and equipment. Don’t forget about internet costs (if you’re not already paying these), including monthly fees (the average was $73 in 2024) and hardware and installation costs (e.g., an internet modem).
Specific examples:
A desk, ergonomic chair, and filing cabinet may cost about $600 from Amazon.
Small office/shop rental + utilities and furnishings (for teams)
A rented office or shop provides space for administrative tasks, meeting clients, and storing tools or small equipment.
Basic utilities like electricity, water, internet, plus furniture, supplies, and hardware are needed for daily operations.
General assessment of costs:
Monthly rent can range from $500 to $5,000+, depending on location and size. Expect $100–$500/month in utilities, plus $500–$2,000 in initial furnishing and other setup costs.
Specific examples:
- A 500-square-foot office in a suburban area might cost around $800/month, while a shop in a city could run $1,500+/month.
- Office Wi-Fi and electricity may total $200/month, while outfitting the office with desks and chairs could cost $1,000/employee.
Storage for equipment
Tools, vehicles, and heavy equipment should be stored securely when not in use.
General assessment of costs:
Storage units or yards can range from $100 to $600 per month, depending on size and security.
Specific examples:
A small storage unit may cost $120/month, while a fenced lot for vehicles and trailers might run $400–$500/month.
Cut costs with Connecteam's Construction workforce management software
Click to learn moreMarketing & branding
New clients won’t find you without strong marketing and branding. For construction companies, this means presenting a professional image and maintaining visibility in the local community.
Logo and website
A logo and website are your company’s “first impression.” The logo shows professionalism, while the website acts like a digital business card where customers can check your services and contact you.
General assessment of costs:
Expect to spend $500–$3,000 for both. There are a lot of free tools out there, too, so costs could be $0 if you make these yourself. However, if you don’t have experience as a graphic or website designer but you do have the budget, it’s best to hire a professional to ensure you make the right impression.
Specific examples:
- A simple website with your phone number, list of services, and photos of past jobs may cost $1,000–$1,500.
- Adding extras to your website, like customer testimonials, or paying someone to boost your visibility in Google search results (known as SEO, or “search engine optimization”) can push costs closer to $3,000.
Pro Tip
Creating a simple Google Business Profile can boost local search visibility and is a great way to get leads for a construction business without spending thousands on ads.
Business cards, yard signs, and uniforms
These items get your name in front of people in your community and help your crew look professional.
General assessment of costs:
Costs are usually $200–$1,000.
Specific examples:
- 500 business cards: $50.
- A yard sign to leave at a job site: $100–$200.
- Branded work shirts for a small team: $300–$500.
Local advertising
Ads and sponsorships help you reach homeowners who don’t know you yet.
General assessment of costs:
Contractors usually spend $200–$2,000 annually.
Specific examples:
- A small ad on Google targeting “bathroom remodel [your town]” might cost $200–$300/month (based on $10 of ad spend per day, commonly considered reasonable spend for small businesses).
- Sponsoring a local Little League team could cost around $500/year and puts your company name on banners where the community gathers.
Total Construction Starting Cost Estimates
| Expense | Solopreneurs | Small teams |
| Registration & licensing | $300–$1,200 | $800–$2,000++ |
| Insurance & bonding | $1,000–$3,000 | $4,000–$12,000 |
| Equipment & tools | $7,000–$15,000 | $25,000–$70,000 |
| Labor & payroll | $0–$500 | $5,000–$20,000 |
| Office & storage | $300–$2,000 | $5,000–$15,000 |
| Marketing & branding | $500–$2,000 | $1,500–$6,000 |
| Total | $9,100–$23,700 | $41,300–$125,000 |
| *These figures reflect typical startup costs (deposits, setup, and the first month or two of operations). Ongoing expenses will continue beyond this initial phase. | ||
Tips for Managing These Costs
Starting a construction company doesn’t have to break the bank. By being smart with early decisions, you can keep expenses manageable and build a foundation for growth.
Here are some expert strategies:
- Have reserve funds: Brian Morton, the founder of My Window and Door Guy, says, “You should have funds saved for your personal expenses for at least 3 months, depending on the type of construction business you plan on starting.”
- Get friends to invest: Brian also says, “ Friends and family are a great place to seek business funding to get off the ground and running.” President of Twisted Nail Broker Services, Hunter Kosar, echoes this, saying, “I secured the $10,000 from a friend in exchange for 10% of the company.”
- Spend strategically: Chris Stevenson, Vice President of Business Development of 730 South Exteriors, says, “When it comes to tools, you don’t need to buy every piece of heavy machinery right away.”
- Your big costs will change: Tate Grafton, Owner of Illuminate Electrical, says, “Early expenses are tools and a truck or van for most construction and home service companies. As you grow, you’ll likely find that payroll will be your biggest single expense.”
FAQs
What type of construction business is most profitable?
Specialty trades like plumbing, electrical work, roofing, and concrete services are often the most profitable. They require lower overhead than general contracting and offer steady demand with strong margins.
What is the fastest-growing construction industry?
The fastest-growing sector is green building and sustainable construction, including energy-efficient housing, commercial retrofits, and renewable energy projects. Demand is rising quickly due to government incentives and customer preference for eco-friendly solutions.