The Most Dynamic Start-Up Industry: Builders

April 11, 2012

When someone thinks of an entrepreneur or start-up company, they typically think of a genius kid that creates a high-tech company like eBay or Groupon. That image is true to a certain extent. But the more accurate image of an entrepreneur and start-up company is an experienced builder starting his own construction company.

More entrepreneurs are starting their own construction companies, according to a report released last week. The new report, highlighted in the Wall Street Journal, showed that new construction companies accounted for 24 percent of all U.S. entrepreneurial activity in 2011. The rate of new construction companies joining the market has increased steadily since the recession and outpaces the rate of new companies in the service industries.

It makes sense that new construction companies would outpace new business in other industries. The housing market collapse in 2007 pushed many small builders out of business. Many more experienced builders and craftsmen were laid off due to low building demand. These laid-off workers typically had years of building experience and training; it was only a matter of time before they went back in their chosen field.

The time may be right for builders and craftsmen to go back to work. Recent data shows an uptick in home remodeling and a small boost in new home construction. Spending on home remodeling work rose from $112 billion in 2009 to $116 billion in 2011, according to the National Association of Home Builders. Likewise, the Commerce Department reported that the number of building permits and new residential projects in February 2012 were 34 percent higher than the year before. The job market is steadily improving and is encouraging perspective home buyers to get back into the market. Residential lending also seems to be on the upswing.

“Housing has faced a long, hard road, but we are seeing signs of the beginnings of a recovery,” reported Jerry Deschane, Executive Vice President of the Wisconsin Builders Association. “Our national economists are predicting a 17 percent increase in housing starts across the country this year, with more to come in 2013.”

Builders can be optimistic about the market improvement and excited about starting their own businesses, but should be mindful of the challenges. First, despite these recovery signs, the housing market is still nowhere near the pre-recession levels. Second, starting a new business can be a difficult and daunting venture. New businesses may take a few years to become viable. A vast majority of new businesses fail within their first few years.

Still, builders and new construction companies have reason to be cautiously optimistic. There will be increasing opportunities for remodeling work and new home construction in the next few years. Builders and craftsmen just need to think like entrepreneurs and grab those opportunities when they come up.

“The key to business success has always been to get in on the ground floor and ride the economic trends upward,” Mr. Deschane reports. “This is the perfect time for someone with experience in home construction or remodeling to take that step.”

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