Starting a custom home building business can feel overwhelming. Between writing a business plan, securing financing, and finding reliable suppliers, there’s a lot to juggle. The good news? With the right steps, you can launch a successful company that helps families build their dream homes.
In this guide, we’ll walk you through how to start a custom home building business in 9 practical steps.
Starting a Custom Panelized Home Building Business: What it Takes
Just like building a custom home, there’s a lot that goes into launching your custom home building business. The steps you take in the early days of forming your company set you up for future success.
To lay the foundation for a home building business that thrives, you’ll need to:
- Write a business plan
- Secure financing & create a budget
- Obtain licenses & permits
- Get insurance
- Form an LLC
- Set up an office or showroom
- Hire a staff
- Establish a list of subcontractors
- Do your homework
Step 1. Write a Business Plan
Most entrepreneurs know what they want -- to run a business that does more than just pay the bills. Their company not only provides a living and a sense of pride, but also is poised for longevity.
Creating a business plan lays a solid foundation for any fledgling company. Your business plan outlines your vision, goals, and financial projections. Include details like startup costs, funding options, and your long-term growth strategy.
It can be as simple as a one-sheet giving a brief overview of your company and its goals. Be aware that if you’re planning to get a loan to start your business, most lenders require a detailed overview of your new company and plans for its future.
Step 2. Secure Financing & Create a Budget
Starting a custom home building business isn’t free. There are plenty of start-up costs you’ll need to cover until your business begins generating revenue:
- Renting or purchasing a space
- Buying equipment
- Paying utilities
- Employee salaries
- Legal fees
- Insurance
- Marketing
Unless you’ve saved up money, you’ll likely be headed to a bank or other financial institution for startup capital. Your lender will want to see a detailed budget of your anticipated costs for your first year of operation and at least the 3 years after that. The lender will also take a deep dive into your personal finances to make sure you’re a good candidate for a loan.
With a budget in hand, you’ll know exactly what expenses to anticipate and the revenue you’ll need to generate to meet them.
Step 3. Obtain Licenses & Permits
Starting a business is not simply a matter of opening up shop. At the very least, your company will need to be registered with the county in which it’s established. If your custom home building business is one that completes actual construction work, you’ll likely need additional licenses and permits to operate.
Required licenses and permits vary by state and municipality. Your local code enforcement office is a valuable resource for learning about the forms you need to complete to operate.
Step 4. Get Insurance
Insurance protects your home building business from those “what ifs.” Should the unforeseen happen, you won’t have to worry about losing your company or falling into financial ruin.
Step 5. Form an LLC
An LLC, or limited liability company, is a business classification. Through this designation, small businesses receive the same legal protections as a large corporation. Practically speaking, establishing your custom home building business as an LLC provides a layer of protection between your company and your personal assets. That means any debts, liens, or lawsuits filed against your company stay there.
There are certain instances, such as fraud, where LLC protections for your personal assets don’t apply. And different states have different rules about what an LLC designation means for your business.
Consult with a lawyer before forming your LLC.
Step 6. Set Up an Office or Showroom
There’s something to be said for walking into an office or showroom.
For potential clients, visiting a brick-and-mortar location gives the impression of legitimacy; they’re not walking into someone’s house and sitting at their kitchen table to talk about their next home. That’s not to say a custom home building company can’t be run out of the owner’s home. Some do, but have a separate part of their house reserved strictly for business.
Having a dedicated space for your business gives you plenty of room for:
- Client meetings
- A small library of custom home floor plans
- Building material samples
- Storing information for your custom home builder marketing plans
Step 7. Hire a Staff
Your home building business has two components: sales and project management. Both are equally important and deserve the right attention. As custom home construction projects are large undertakings, it’s best to have a support system of employees at the ready.
At a minimum, your company should have a home dealer and a project manager on staff. They’ll work in tandem with clients through each step of the custom home building process.
A home dealer meets with prospects and handles most of the up-front work with a client, such as:
- Selling a home package
- Answering client questions
- Understanding clients’ needs and wants
- Orchestrating floor plan development
Once a client commits to a floor plan, a project manager takes over to organize and oversee the development and construction of a home. This extends to clients who act as their own general contractors.
With a home dealer and project manager working together, your company is able to service more clients and build more homes.
Step 8. Establish a List of Subcontractors
Whether your custom home building business manages projects or builds homes, having a diverse list of dependable subcontractors is essential.
While all home projects have similar construction elements that most general contractors can handle, some elements require specialized labor. It’s not uncommon for custom home builders to hire subcontractors to handle jobs that need a certain level of expertise, such as:
- Installing a foundation
- Electrical wiring
- Creating custom shower enclosures
With a bullpen of subcontractors, you’re ready to tackle custom home projects no matter what it takes to build them.
Step 9. Do Your Homework
Those looking to build a custom home want to work with someone well-versed in making their project a reality. Nothing drives a client away faster than a custom home builder who can’t answer their questions.
Doing your homework before opening your doors allows you to truly be a resource to clients.
A successful and reputable custom home builder understands their local housing market and the factors that impact home construction, such as material and land prices. They’re also experts on the types of home packages available -- they can speak to all the details of a custom home build and the choices the client needs to make.
FAQs About Starting a Custom Home Building Business
Costs vary by location, but expect anywhere from $50,000 to $250,000, depending on licensing, equipment, and staffing How long does it take to establish a custom home building business? On average, it takes 6-12 months to set up operations, secure financing, and build your first home. Do I need prior construction experience? Not always, but partnering with experienced tradespeople and suppliers are essential. |
Ready to start Your Custom Home Building Business?
Starting a custom home building business isn’t easy, but with the right plan and partners, you can set your company up for long-term success.
Barden has worked with many new custom home businesses as they started up, giving them the support and tools to succeed.
As one of our independent dealers, Barden provides you with:
- Mentorship
- Marketing materials and funding
- Networking opportunities through our dealer network
- Training
- Reports on market conditions and housing trends
As a partner to your business, Barden works with you to build a company poised for long-term success.
Begin Your Custom Home Building Business
Entering the custom home building industry is a big step for anyone. Successful companies don’t just happen -- they start with spending the time to lay the right groundwork.
By taking a thorough approach and getting everything you’ll need to operate lined up ahead of time, you’ll hit the ground running when you open. And you’ll be able to focus on what matters most: running a company to be proud of.
Download our e-book, Becoming a Barden Independent Dealer: A Blueprint for Success:
