Breaking Ground – Starting An Earthmoving Business

Breaking Ground – Starting An Earthmoving Business

Few operations have the potential for success like the earthmoving business. This is especially true when construction booms take place. With the Coronavirus forcing many businesses to scale down operations those in the earthmoving and construction sector have been forced to put expansion plans on hold – and many who were considering an earthmoving startup were tempted to hold off on those plans. However, as restrictions related to the pandemic have started to lift there are signs that construction projects that were on hold or scaled back are once again going to shortly be going ahead full steam.

So, starting an earthmoving business is once again a viable option – but, like any business venture, a startup of this nature can be risky. Here are some factors to consider before taking the plunge.

1. The Business Plan.

developing a great business plan is essential when launching any business. Speak to financiers or Angel Finders of any description and they will be quick to point out that the lack of a well-researched and put-together business plan is one of the most common reasons for startup failure. That business plan needs to take into account various scenarios and constraints such as cash flow and financing costs. The marketing section of the business plan needs careful thought – it is one of the most pivotal contributing factors to raising finance.

Your business plan will also set out details of the niche within which you will be operating. During the startup phase, it might not be a good idea to try and be all things to all people. Find a niche and dominate that before you look to increase investment in assets or look to expand your staff contingent.

2. Rental or Purchase.

In the initial stages, it may be a good idea to rent equipment, rather than opt for outright purchase. Rent to buy is another option that should be carefully considered. The rental option is attractive during the period where you will be building up a client base and establishing a reputation. It avoids those upfront costs related to the purchase of assets – and this directly influences cash flow and unlocks operating capital.

3. Finance.

An earthmoving startup can be capital intensive. Machinery is not cheap and there are other expenses to take into account, such as staffing and materials. Maintenance is another issue that needs to be taken into account. Reserves of working capital are pivotal. An earthmoving operation typically does not receive payment until after the job is complete. Where all of the assets are employed on a single project this can mean that the working capital is essential. However, there is the option of negotiating milestone payments, which can ease the pressures on working capital.

Shop around for finance. The cyclical nature of the construction business means that many lenders may be reluctant to fund an earthmoving business. Finding the right finance partner can involve a bit of legwork and a lot of research. Make sure that you find a financial advisor who has a history of success in asset finance – that equipment is going to be one of your biggest costs.

4. Focus and Time Management.

Most advisors think that time is one of the most valuable assets that any person who is establishing an earthmoving business will have. As with any startup, the temptation is for the owner to be ‘hands-on with every aspect of the business. Passion is essential – but there is always the danger of spreading yourself too thin. Micromanaging every aspect of the business can be a recipe for disaster. Find good people and empower them to make decisions.

Most of those who establish an earthmoving operation has an extensive background in the industry. they might be better employed in operational roles such as client relations and project management – rather than finding themselves bogged down in administrative duties such as invoicing or other ‘back-office work.

5. Insurance.

Having the correct insurance is essential. A great insurer will provide products that will not only protect the mechanical assets of the organization – but also its human assets. The nature of an earthmoving business is that any project will require that downtime be kept to an absolute minimum. A good idea is to open what could be termed a ‘rainy day account. Usually, this is a savings account – and regular deposits are essential. This fund will protect the business during those lean periods – or when equipment is being replaced (or the business is awaiting funds from an insurance provider).

6. Marketing.

Marketing is not one of those ‘nice to have’ business functions – it is essential. We are living in a business environment that is hyper-competitive – and the sooner that an earthmoving concern starts to differentiate itself from the competition the better. The business brand is an incredibly valuable asset – and everything should be done to protect it – and enhance the company’s reputation (and position service offerings). This is not to say that the company must spend huge amounts of money on marketing – the plan must be carefully thought out. The digital world (and social media, as well as a great website) can cut down on marketing costs while allowing for exceptional focus to reach the right audience. The great thing about a considered digitally-focused marketing plan is that the results are measurable – no more ‘scattergun’ approach – the results of the marketing efforts will show exactly what is working and what is not. Employing a digital marketing agency is something that should be carefully considered.

When all is said and done having a good corporate advisor can make all the difference to any startup – especially one such as an earthmoving operation where business can be cyclical. Extremely focused attention on that business plan should always be the first step – it will be the blueprint for success. Keep focused and bring passion to the job – and your earthmoving business will have the essential components for success.

Travel Man

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