Most people who start a construction business do so because they are competent tradespeople with more work than they can do for someone else. That is a good starting point and it is not a business plan.
Licensing and competence
Establish what your work actually requires. Restricted building work on residential buildings must be carried out or supervised by a Licensed Building Practitioner licensed in the relevant class, and working outside your class is a disciplinary matter regardless of how good the work is.
Electrical and plumbing, gasfitting and drainlaying carry their own registration and licensing regimes with their own boards.
If you will supervise others on restricted building work, understand what supervision actually requires — sufficient control and direction to ensure the work complies. Nominal supervision across multiple concurrent sites is a common complaint before the Building Practitioners Board.
Insurance before the first job
The covers that matter:
- Public liability — damage to third-party property or injury. Non-negotiable, and most clients and main contractors require evidence.
- Contract works — covering the work under construction, which is otherwise uninsured until handover.
- Tools and plant, including in vehicles overnight, where standard policies often have low limits.
- Motor, on a commercial basis rather than private.
- Professional indemnity where you provide design input or advice, which is more common than trades realise.
- Statutory liability for defence costs on regulatory breaches.
Check what your customer contracts require you to indemnify, and confirm your policy actually responds to it. Signing an indemnity your insurer will not back is a serious and common exposure.
Terms of trade and payment
Written terms before the first job. They should cover payment terms, interest on overdue amounts, recovery of collection costs, retention of title on materials, variation process and what happens on cancellation.
Residential building contracts above a prescribed value must be in writing and contain minimum content, including a payment schedule and dispute provisions. The standard forms published by the industry associations are far better than an informal arrangement.
Learn the Construction Contracts Act payment claim regime immediately. A compliant payment claim obliges the payer to respond with a payment schedule within the required timeframe, and failure to do so generally makes the claimed amount payable in full. Casual invoicing gives away a statutory advantage that costs nothing to hold.
Pricing that carries the business
Work out your overhead rate properly — total annual overhead divided by total direct cost of work. Most new operators discover it is 20 to 35 percent once vehicles, insurance, unbilled time and administration are counted.
That overhead recovery goes on every job before any margin. Adding a single percentage on top of materials and labour, and calling it profit, is how busy builders end up with nothing.
Health and safety from the start
As a PCBU you have duties whether you employ anyone or not, and if you are a company director you carry personal due diligence duties.
The practical minimum for a small operation: a hazard and risk assessment for the work you actually do, site-specific briefings, working at height controls that are not just a harness, maintained equipment, training records, and incident reporting. Falls and vehicles are where the sector’s serious harm concentrates.
Notifiable work must be notified to WorkSafe before it starts.
Choosing the first clients
Early jobs set the pattern. Some are worth declining:
- Clients who will not sign a written contract.
- Work outside your licence class or genuine competence.
- Scope you cannot define, priced as a fixed sum.
- Payment terms that require you to fund wages for months.
Check who you are contracting with through the Companies Office. A director on their fourth building company in eight years is telling you something.
MBIE publishes building contract and licensing guidance at building.govt.nz, and WorkSafe publishes small business health and safety material. Both free.
General information only, not legal advice.
