So you're thinking about getting into the excavating business.  Very interesting.  You've got some questions to ask yourself.  What brought you to this point? What in the world stirred your entrepreneurial spirit prompting you to consider dumping tens of thousands of dollars into a business so demanding?  If you're anything like the others who marched (or tracked) on before you into the glamorous world of excavation (sarcasm here) there are certain factors that probably brought you to this point.

One of the big reasons people consider getting into the excavation business, or any business for that matter, is their job.  They are sick and tired of getting up early, grinding all day long on projects, and getting little or no positive feedback on the work they do, only to get what seems like a peasant's salary at the end of the week.  The blood, sweat, and tears just don't seem worth it any longer.  Not only that, but you see how the company you work for is running things and you just don't like it.  You know you can do better job managing machines, contracts, and people.

A tiny voice inside your head is urging you to seriously consider starting your own business and that voice is growing louder and louder.  It's slowly starting to drown out that other voice that has consistently said you're not the type of person who runs an excavation company.  Why not you?

Some of you may already have a head start having helped run a business, maybe with family.  Regardless of how much experience you have, the rest of this article should be helpful.

To be successful in business you have to love what you do.  In the case of excavation, you have to love moving dirt.

There are many other things to consider before you take the leap into the excavation business including finances, timing, and preparedness.  However, before you approach those concerns, you need to really think about what you're getting into.  Very few businesses get off the ground without someone with passion behind the wheel.  Do you have enough passion?

1. Getting Real

You've probably heard the expression "fake it until you make it".  Although that's a catchy phrase, truth is, you can't fake anything.  Well, you can fake anything you want, you're just not going to suddenly one day turn the farce into fact.  With more on the faulty concept of "faking it until you're making it" and other business starting concepts check out the Selling For Life Podcast sponsored by ConEquip Parts.  There you will receive good information to help you not only in your potential business ventures and selling techniques, but you will also get valuable life tips on how to be a more productive person.

Notice the word "sell" came up at the end of the previous paragraph.  Selling is going to be a huge part of what will make your business successful.  You need to have selling skills.  You cannot expect to cultivate business to survive let alone thrive without the ability to sell.  You have to sell your business, sell your skills, and sell yourself.

Why would someone contact your new excavation company when people in your area can simply hire the services of the company you used to work for?  They've been excavating a lot longer than you have as a company.  They have a proven track record and have carved out a comfortable place in your area's marketplace.  You're the new guy (or gal) perhaps starting from scratch.  The hill you have to climb is big and will need everything you've got to get to the top.  Passion.

So, if you've read this far and you're not phased, still burning with the desire to get an excavation company started, you should definitely continue reading as it appears you answered the big question.

2. A Business Plan

Before you buy your first piece of equipment or bid on your first contract, you'll need a business plan.   If you need help putting together a business plan, you can check out the Excavation Company business plan.  A business plan includes your vision, management team, and marketing strategy including a projected financial statement for five years.  Include the types of projects you will bid on, the types of companies you will partner with, and the size of the company you plan on running, with a total number of employees.

3. Type of Business

You will need to decide on what kind of excavation work you will be doing.  Commercial excavation is a much different field than residential, as it requires more money to get started, extensive insurance coverage, and enough capital to maintain the business.  If you want to do commercial excavation but you're not sure you have the resources available immediately, you can always start doing residential excavation work first.

4. Money, Money, Money

Once you determine how much money you will need to get started you'll have to figure out where the funds will come from.  Here at ConEquip Parts we discourage taking out loans of any kind to start a business.  We understand debt is just a part of life but it doesn't have to be part of yours.  Getting a business started without borrowing money is definitely more challenging and may take more time, but we firmly believe it has a healthy financial payoff in the end.

Many businesses end up being in debt for years because they can't generate enough money to get the loans paid off to start turning a profit.  Some businesses get used to the debt process and keep borrowing as a way of keeping operations going.  Often, this financial strategy leads to loan default, causing businesses to close and file for bankruptcy.

5. Legal Stuff

Once you have a business plan and the capital to execute that plan, you'll need to start taking the necessary steps toward becoming an excavator company.  Depending on the laws of your state, you'll need to submit certain applications and apply for various permits.  You will need a traditional business license, while you and all employees will need to be licensed to handle heavy equipment.  Machine operators will need proper training.   If you will be doing residential work, you may need a residential contractor's license, which in some areas requires an extensive background and financial checks.

You may be required to obtain a surety bond by the state. Many construction firms are required to have a bond of at least $75,000.  You will also need a general liability policy of at least $1,000,000 in coverage.  As you acquire equipment, make sure the policy covers business property against loss including accidents and vandalism.

6. Assembling your Fleet

What type of excavation work will you be doing?  Will you be contracted for simple excavation or will you offer services such as environmental remediation, soil testing, and boring?  The type of work you plan on specializing in will determine what kinds of machines you will need.

When it is time to start investing in pieces of equipment, there are many options depending on your budget.  Machines can cost anywhere from $10,000 to well over $100,000 depending on what you are looking to buy.

Most new excavation businesses aren't in a position to go out and pay cash for a ton of new equipment.  Even if you are in a position to invest in spanking new machines, it may not be the best course to take, especially if you plan on financing.  In fact, it is best to completely avoid financing if possible.  If you can afford new equipment, having machines ready to roll to a job site definitely is an advantage.  It also helps operators get used to specific machines which increases productivity.

You can also invest in used equipment.  Auctions are a good place to find some gems.  You can save thousands of dollars but of course, used equipment usually won't come with a warranty or service plan.  If you are in the market for a used piece of equipment, thoroughly inspect the machine from top to bottom.

Check out one of our cool videos on buying used equipment, one for buying a used backhoe and another video for tips on buying a used mini excavator.

Whether you choose a new or used machine, invest in one that is popular and has a good track record.  It may be tempting to plop down $22,000 for a super running used Trojan 5500 wheel loader, but how difficult will it be to replace parts on this machine?  It probably makes more sense to spend three times that for a wheel loader such as a used Caterpillar 924G where replacement parts are readily available.

Renting machines as you start out is also a great way to go because contracts may be sporadic in the first year or so.  When leasing machines, you can get the specific equipment and attachments needed for particular jobs.  Also, when you lease machines, the owner doesn't usually have to be concerned with storage, maintenance and most repairs.

There are some downsides to renting machines.  Often a piece of equipment you may not be available.  The cost of renting machines can pile up if jobs are delayed by weather or other problems.  Lastly, leasing machines can be problematic if the company you rent from isn't reliable.

7. Buying Parts

Connecting with a good parts broker is a great way to help keep replacement part costs down.  This is where we shamelessly plug our own company!  Can equip Parts has forged and maintained relationships with hundreds of reliable parts vendors across the world.  The advantage of working with a company like ours is that you get quality parts quickly, at a competitive price, backed by a warranty.  Having ConEquip as the go-to company for your parts needs truly is a great resource to help you and your company get ahead.

8. Get to Work

When you are ready to start digging for money, get it? Digging for money?  You should be aware, that you may do a whole lot of digging before you see any dollars.  That's because there is usually about a 90 day lag between when you bill a client for your work and when you actually get paid.  You should also be prepared to run into clients who drag their feet when it comes to settling up.  When you these situations arise, you will need cash in the bank to keep operations going.  Taking out loans to float your business is not a good idea.