How To Start A Construction Company in Kenya
When you start a construction company in Kenya, you are assured it is going to be profitable. With more people buying land and developing them, everyone is procuring construction services. A lot goes into starting and growing a construction company in Kenya. While funding is critical, numerous research is needed to grow a successful construction company.
Below we highlight some of the most critical steps you need to take to succeed in your construction company.
1) Come Up With A Business Plan
A business plan is an essential strategic tool for any entrepreneur. And So, it goes without saying, when you are looking to start a construction company in Kenya, a business plan should be at the top of your list. This ensures your ideas are articulated, and your marketing strategy is outlined. A business plan will also come in handy when looking for funding from VC’S, angel investors, and lenders.
Having trouble coming up with one? Not to worry, our experts will help you with that.
2) Know your business model
While it appears easy from a bird’s eye view, a substantial amount of effort is required in the beginning. Your business model should align with your skills and those of your staff. It should align with the available market, and it should be easy to grow.
Some of the business models you could consider are:
Direct to general contractors– this is for new real estate projects and remodels.
Direct to client– this is for property development jobs for both businesses and individuals or if you offer a service like a consultancy.
Unique niche– This is for package builders, project managers, or real estate developers.
Once you come up with a good business model now, you can go to the next step.
3)Register Your Construction Company
While the construction company is undoubtedly a lucrative one, most people have no idea how to register it. So most people end up having an informal construction company. This, of course, will bring you problems with the law.
Listed below is what you need to register your business and be compliant with the law.
a) Conduct name search;
This ensures you do not have the same business name as any other company. It is crucial as it helps your business stand out. The procedure takes about a day, and after that, it is reserved for you for 30 days to register the business name.
b) Memorandum of association;
This defines a company’s structure, and objectives provide the company name and outline the scope of activities the company will be engaging in.
It also contains names of directors and their shareholding in the company. It also gives regulations through which the company can be managed and owned and indicates each director’s rights, powers, and responsibilities.
c) Compliance certificates;
You also require to get licenses from legal bodies of construction. The construction industry is regulated by the county government and The National Construction Authority(NCA). The county government issues the permit. However, one has to register the projects with the NCA, which will issue you a compliance certificate to give you the go-ahead to start your construction projects.
The NCA has seven classifications depending on the scope of work the company can undertake; These classifications range from NCA1 being where the director has a degree in building and construction or a related course to NCA 7, where the director has a trade test. The registration and annual fees also vary across these classifications.
Other licenses required include work permits as a foreigner and business permits from the county government as well.
4) Fund Your Construction Company
When looking to start a construction company, you should have sufficient money to cover the costs of running the company. These include rent and equipment costs, which can be pretty costly, especially for a startup. The construction company in Kenya heavily depends on material sourcing which can present several challenges.
However, there are several alternatives that you could consider;
a) Purchase order finance-This is a legally binding agreement that a buyer uses to request goods and services from a seller. If the financial lender approves your financing, the provider pays your supplier, filling the orders.
b) Vendor financing agreement– This is a contract between you and the supplier, where you will negotiate a reliable payment process for procuring the construction material.
c) Equipment loan– you could also consider borrowing a loan to allow you to buy the materials you need. Most lenders will need proof that you already signed an agreement with a client before lending you money.
With these three options, you do not have to worry much about financing your company. Just be sure to honor your part of any options you choose to maintain trust and avoid problems with the law and a bad reputation.
5) Market Your Construction Company
You need to tell people about your company and activities. Today, the world is online, so you should probably consider online marketing alongside traditional marketing methods. Get on relevant social platforms and showcase your projects as well as promote your business. Also, be sure to get a website; it gives the impression that your business is significant, even if you are starting.
When it comes to marketing, You might feel overwhelmed. But do not worry; we will help you with that and help you reach the right audience, and create a brand for your construction company.
6) Hire The Right Staff To Help You Grow Your Construction Company
You need to get experienced people in your company, especially since you are starting. You cannot manage to make any mistakes as they could prove critical in the long run. Hire experts who will do a remarkable job; a good job will have your customers gushing about your expertise to other people. This will help establish your presence in the construction industry and have more people sourcing for your services.
7) Learn How To Bid For Tenders
You will need to learn how to bid for jobs and tenders to succeed when you start a construction company in Kenya. The constitution of Kenya has stated that all government departments reserve 30% of their tenders and contracts to women, youth, and people living with disabilities. If you fall under any of the above categories and might be interested In working with the government, then head over to Access to government procurement opportunity (AGPO) for a certificate which will pre-qualify you to bid for the reserved tenders.
8) Grow Your Network
As human beings, we are social animals, and we need people to progress in life. You will need to meet and know people and nurture these connections you make in the construction space. These relationships will help you secure tenders and jobs and show you the ropes in the industry; especially being a newbie, you will need this guidance.
Summary
When looking to start a construction company in Kenya, It might initially seem so complex. But, with these steps, as well as sufficient research from your end, you will be well on your way to growing a successful construction company in Kenya.
In case of any questions or inquiries, reach out to us. Our experts are always ready to help you.
