How to Start an Excavation Business in 2021? Beginners Guide

Are you planning to set an excavation business but don’t know how to start it? If yes, then we are here with a complete step by step guide for you. Establishing an excavation business takes a lot of preliminary processes.

It will turn into a profitable business if you do all the strategic planning before starting it. The excavation business is an essential part of any construction project. Excavation means to make land preparation for construction.

how to start an excavation business

Commercial or Residential

 Excavation involves removing rocks, debris and other unnecessary things from the construction site. There is two kinds of excavation residential excavation and commercial excavation.

A residential crater is smaller than a commercial one. The job will be the same for both that is digging the soil and supporting the infrastructure.

If you are planning to startup, better start with residential excavation. It will cost you less initially. It would be best to have a large investment, significant planning, and much more advanced commercial excavation tools.

Below we have defined some necessary steps to start an excavation business:

Register Your Company

The first and foremost step is to register your business name in the state where you want to establish it. These days everything is digital.

  • Go to the online site of the secretary of state. The site will show you some name for your business.
  • Select a comfortable and unique name for your business. The title should be relevant to your company and easy to remember for the customer.
  • Once you select the name, fill the form carefully on the website.
  •  Pay registration fees. Usually, the state will take some time for approval.
  •  Once the approval is complete, take a tax identification number from an IRS website. The tax registration number is essential to open a business account, receive credit and to run Payrolls.

Business Plan

Starting a business is easy if you have complete planning. You should plan your initial steps and consider what will be your last steps. First of all, What is your initial budget?

Make proper calculation and make a budget distribution for every future investment. Make a team of skilled and professional members, plan how many members you require in your group. Plan the salary scale for team members.

You should know your ideal customer. Plan the number of companies you work with within your initial five years. Decide the name of brands that you want to associate with your business. Thoroughly bid on the type of projects. Specify a handful of money for purchasing equipment.

Invest in Equipment

The main component of the excavation business is tools. The small excavating machine can work best for you if you are taking a start with residential excavation.

The backhoe is the primary excavation tool. You can buy new equipment or purchase a second hand. You have to set at least a budget from $10,000 to $50,000 for buying new excavation equipment.

New Excavation equipment will cost you more than 100,000$ if you go for an advanced one. For commercial excavation, you will require more significant equipment.

The best idea is to rent equipment rather than buying on an initial level. Evaluate your financial sources. Do not forget to involve the truck that you will require to transport your gear to the location.

Get Insured

Go through the state policies for business insurance. Some state requires only $50,000 insurance policy some require more. Make sure all your equipment is under insurance against any damage on site.

Also, get worker’s compensation and surety bonds that will protect your clients against any loss. Mostly construction business required to have 75000$ surety bonds.

Learn the Laws

Before start digging any ground, either commercial or residential. There are laws in all states regarding excavation. Learn the rules for excavation in the state to avoid any wrong strike on utility lines.

States issue permit for the pit on location. Know the method required for searching to prevent all sorts of errors. Wrongful digging can cost you extra fines.

Business Funds

There are many factors to rule out before setting a budget for the excavation business. Finance for buying equipment is paramount, but there are many other things costs attached.

Do not forget to consider Licensing fees, insurance and leasing cost. Marketing cost is also a considerable amount to look on. Overall, budgeting is a very crucial process.

If you are unable to do it by yourself, take help from agencies. These agencies will look deep into finance and budgeting expect. Not only this, but they will also direct you toward banks that can give you a loan for your startup excavation business.

Get Licensed

For working in any state, you require a business license. Working permit to dig the ground is necessary, but the project personnel should be licensed and experienced.

A license for working with heavy equipment should be issued. Operators that handle heavy equipment should be well skilled and certified. In the case of residential excavation work, you need a residential contractor license.

Drivers that drive the heavy vehicle to transport machinery and other related equipment should also be well trained and licensed. Hire a manager that will take care of all the licensing checks and availability.

Marketing of Your Business

No business can fly alone. Make your contacts with general contractors and other companies. Clients will never trust new business for digging their location soil. Outline your business services and make them visible to your clients.

If you have limited excavation services, try to shake hands with firms that offer other services. Make a relationship with them and hunt clients together.

Join groups related to your business niche and explain your business services to your clients. General contractors have a bunch of clients. Make contacts with them.


The excavation business is not a very competitive field. But it requires a complete set of planning and skills to be successful in this trade.

Usually, big projects hire excavation firms who provide excavation services and other related services like soil testing, preventing environmental impact and other soil erosion remedies. Be precise and well-skilled in what you offer.

Starting from a small and single excavation unit can also help you earn a profitable business in your initial tenure. Expand your services with time as you learn the techniques and laws of excavation.

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