How to Start Your

Asphalt Paving Business

W
From AsphaltPro Staff

While starting a business in any industry takes a well thought out • General Liability insurance—Chances are, you and your em-
plan, starting capital, legal documentation, and a host of other con- ployees interact on a daily basis with people such as clients, ven-
siderations, firing up a paving company takes moxie on a complete- dors, subcontractors, and motorists driving through a work zone.
ly different level. Besides the talent you must bring to the table for Any one of them could experience an injury or loss and if your
a paving operation, there are business-related decisions that will business is to blame they can file a lawsuit. This type of coverage
impact your bottom line. Let’s follow guidance from some experts protects both your business and your employees. It will take care
to help you build a plan for a successful start. of the medical bills and costs related to property damage due to
day-to-day operations.
Start with a Solid Foundation • Business Owner’s policy—If you’re a business owner, you’re
subject to liability. You need to make sure you’re protected. The
Travis Crabtree of Swyft Filings online services provided a checklist
of four main steps to build your basic foundation. Business Owner’s policy is a combination of the General Liability
and Commercial Property insurance, offering savings compared
Step One: Create a business plan. to purchasing the coverage separately. It’s ideal for small and me-
Every business needs a blueprint for how it will grow and succeed. The dium-sized businesses because it’s a convenient way to be ade-
business plan is your guide for growing your business and includes strat- quately protected.
egies for how you’ll succeed and what it will cost to run the company. • Worker’s Compensation insurance—Worker safety should
always be a top priority; however, accidents can happen at any
Step Two: File the paperwork to form an LLC or time. This policy is a legal requirement in most states in the
C-Corp with your state. United States; it takes care of the medical expenses and salaries
Although the majority of small businesses formed in the United lost of employees who sustain injuries at work. It protects both
States are limited liability corporations, you may want to discuss parties—the business owner against expensive lawsuits, and
the differences and benefits between an LLC and C-Corp with your the employees who will receive benefits in case they get sick or
tax professional. injured at work.
*Note: Even though you do not technically have to incorporate “Having proper coverages is one method of risk management to
yourself to do business as a contractor or handyman, forming an minimize the chance of a damaging claim or lawsuit shutting down
LLC will protect your personal assets in the event that your busi- your business,” Loughlin concluded. “Carry adequate contractor’s
ness is ever sued. Additionally, if you own any of the worksites or insurance and set up management plans so everyone knows what to
projects where you are working, you may also want to consider cre- do and what to avoid while working. Make safety a priority, not only
ating an LLC for each project. For example, if you purchase a house for the business but also for motorists on the road.”
with the intent to repair and resell it, you can make that project/
house its own LLC. This will further protect your business and as- Step Four: Double-check your admin details.
sets in the event that anything happens during that particular proj- After you build the foundational blueprint of your business through
ect so that it does not impact your other projects. a plan, you must also address the administrative details. In addition
to filing the proper paperwork with the state, ensuring that your em-
Step Three: Obtain the necessary insurance for ployees are properly classified (W2 employees or independent con-
your business. tractors) is a key issue to think about from the beginning. You also
In addition to liability insurance, you may also need insurance for your need to be careful to follow all of your state’s regulations with regard
employees and equipment, and an umbrella policy. The annual premi- to documentation. In short, you have plenty of details to chase.
ums can run between $2,000 and $5,000, according to Crabtree.
Jim Loughlin, an insurance industry veteran with over 25 years
of experience, and a senior sales director at CoverWallet, a tech Check out the article “Tips to Properly Classify Your Employees”
company that enables businesses to understand, buy, and manage at TheAsphaltPro.com.
insurance online, discussed the different types of insurance a con-
struction business should have on its radar to protect the different
LEFT: Travis Crabtree is the president and
aspects of a company. general counsel of online business filing
“To choose the right kind of coverage, the key is to know what company Swyft Filings and counsel with
you’re up against,” Loughlin said. “In the case of a road builder, it’s the law firm of Gray Reed & McGraw LLP,
crucial to assess the needs of the company and the potential risks Houston, Texas. His law practice focuses
involved in the industry.” on assisting start-up and technology
Loughlin listed and described three types of insurance he recom- companies with all of their legal needs. RIGHT: Jim Loughlin is an
mends for those in the road building industry: insurance industry veteran with over 25 years of experience.
 With so many options, it’s important to know the pros and cons of
Prep Your Cash Flow each. SBA loans and bank loans tend to feature cheaper and more gen-
Once you set the pieces in place, you want to start bringing in the
erous loans, but underwriting requirements can be strict. It can take a
money. But wait. There’s more.
long time to process a traditional loan. Online lenders are faster and
When you start an asphalt paving business, you’ll have monthly
easier than bank loans—though they may come with higher rates.
equipment notes and supplies/materials costs that other business-
Do your due diligence to figure out what funding solution is right
es might not have. While all companies have employees, utilities,
for your business.
insurances, and the usual costs to pay on a monthly basis, you will
 
have additional expenses outgoing while waiting on large projects
AsphaltPro: What tips can you suggest for the smaller paving
to be completed and invoiced. The team at Kabbage, which has pio-
company when planning for seasonal employee wages and benefits
neered a financial services data and technology platform to provide
so the owner can keep quality/trained personnel on hand during the
access to automated funding to small businesses, answered some
height of season?
specific questions for us about cash flow.
  Answer: Hiring is essential for any growing business, large or
small. Ineffective hires and employee turnover can potentially cost
AsphaltPro: For the smaller paving company functioning as
your business 30 percent of its yearly earnings, according to the U.S.
a general contractor on a residential or commercial project, what
Department of Labor. Instead of bargain shopping for employees,
are the pros and cons to paying subcontractors—such as stripers,
use additional funds to invest in the right hiring platforms, post
mills, concrete curbers—in 30 days, whether or not the project is
multiple job listings, manage payroll, and cover onboarding and
complete or the customer has paid?
training costs. You could also use funds to give current employees a
Answer: The biggest con would be that the general contractor
bonus for referring talent, or simply to help retain them.
may not have been paid by the client within the 30 days and paying
A longer cash flow cycle can hurt your cash flow. This applies dou-
subcontractors without working capital on hand can be difficult on
bly during the height of the season when you need to invest in your
finances for the whole company.
company and personnel to get the bigger contracts that sustain the
On the other hand, making it a policy to pay subcontractors in 30
business for the rest of the year. One way to shorten your cash flow
days can be a great way to enforce healthy cash flow practices. If you
cycle while also improving your customers’ experience, in any sea-
pay your subcontractors within 30 days it means you would have to
son, is to break up your invoices.
be very on top of your cash flow and finance management. Always be-
Customers appreciate prompt, smaller bills because it helps
ing prepared and one step ahead of any cash out scenario is crucial in
them manage their own cash flow. A shorter cash flow cycle helps
case of any unexpected expenses or crisis in your business. Since the
you have more working capital on hand to make sure you can pay
general contractor is obligated to pay the subcontractor regardless
your employees on time and offer them more perks and benefits. 
of whether they have been paid by the client, it is important to be on
 
time for your payments so you can avoid your subcontractors filing
AsphaltPro: What is the No.1 cash flow concern to guard
a mechanic’s lien or suing you for breach of contract as well as avoid
against? And how can the owners protect the company?
violating trust fund law. Enforcing a 30-day rule for your business may
Answer: The number one cash flow concern is simply not having
keep you accountable.
cash on hand to strategically manage your company. It is important
It can also be helpful during seasonal peaks when subcontractors
to diversify your funding options to reactively guard your business
are high in demand and you are competing with other general contrac-
against crisis as well as proactively seek and take advantage of op-
tors for the best talent. If subcontractors trust you more to pay them
portunities to grow and prosper.
on time, you may get the advantage in hiring and keeping good talent. 
Buying smaller increments of inventory, hiring staff during busy
seasons or requiring payments for orders up-front are all steps you
 AsphaltPro: How can the smaller paving company protect itself
can take to prevent cash flow gaps and maximize the funding you
from financial hardship when a larger project has multiple compo-
can use to invest back into your business.
nents, thus multiple subcontractors and vendors to pay?
Answer: With so many components of a project moving simulta-
neously, it’s important to make sure you have all the moving pieces
of your business in check, too. When you have a detailed budget for Plan Ahead for Leadership Transition
the year, you will have a clearer picture of how each project compo- The team from Lehman-Roberts Company shared that its over-
nent can best contribute to your company’s healthy cash flow and 75 years of positive growth comes from how its leadership has put
protect it from financial hardship. “helping people” ahead of the mechanics of building roads. In other
Plan to pay your company’s predictable expenses, like quarter- words, the company’s founders, W.E. Lehman and George B. Rob-
ly taxes, marketing costs and insurance premiums, when big bills erts, had a friendship that fueled a business that valued both its work
for your project are not due. Additionally, if you invested in capital and its employees.
equipment, you may be able to claim depreciation and other write- “It was true of my father-in-law, Jim Madison, who helped establish
offs to minimize quarterly tax payments and free up cash. a family legacy in the company,” Chairman Rick Moore said. “Now,
You can also work with your accountant or use tools to analyze as I watch the management of our company pass to my son, sons-in-
your finances and make small adjustments to smooth out the peaks law, and nephew, I know more than ever that the paving industry isn’t
and valleys in your cash flow. An easy place to start is taking advan- made great by the roads we build, but by the people who build them.”
tage of upfront payment discounts and making sure you have access He’s talking about the transition of leadership from one generation
to funding for those inevitable unexpected costs. to the next, which is something you need to plan for from the beginning.
There are several options for getting extra funds. Depending “As our industry continues to grow and evolve, it’s important to
on your needs, you may choose an SBA loan, alternate lending, know where your company is going—and while these four tips can
a commercial loan, peer-to-peer lending, a line of credit or as- help fill those gaps, it’s crucial to always remember that people are
set-based financing. the key to success.”
Tip 1. Set up a transition plan
Moore explained that you must plan ahead and set your company
up for a successful transition to new leadership. “If you’re a year
or two away from a major transition, you should have a plan well in
place. A successful transition plan takes a lot of time and self-sacri-
fice. You’ve got to be willing to put the success of the business above
yourself, factor in every contingency, and prepare your own infra-
structure for new leadership.
“That’s all separate from actually running the business. You al-
ready know that our industry is driven by plenty of external fac-
tors—public funding for infrastructure is at an all-time low, and
companies are having to learn to work within those restraints.
That’s why foresight is important. Jim Madison had a generation-
al vision from the beginning, so we’ve spent decades developing a
plan to take the company from our third generation to our fourth.
We already have a framework established for the next major gener-
ational shift.”

Tip 2. Get a team you trust

While the leadership of the company will try to factor in all con-
tingencies when planning for the day-to-day operations, as well as
emergencies, the reality of business is that the transition of leader-
ship will include some surprises.
“You need attorneys, accountants, planners—it takes an entire
team of people to help make the transition smooth,” Moore said.
“With something as sensitive as the success of your business, they
need to be people you trust.”

Tip 3. Accept change

Letting go of the reins can be its own challenge, according to Moore.
“My son, sons-in-law and nephew have new ideas, new ways of driv-
ing the business. But just as our company has had to adapt to chang-
es in the industry, I’ve had to learn to embrace these changes. Back in the old days, it looked as if one feed bin was enough. Today, the
“I trust our next generation of leadership because I know they’ve
Lehman-Roberts team incorporates RAP bins and more.
looked back with me. I know that as we planned the transition, they
were on board with our company’s goals and values. And I know
they’re committed to keeping Lehman-Roberts strong enough to
pass on to the next generation, just like I was.”

Tip 4. Keep building forward

Moore reminded us that we are lucky to be part of a great industry.
We are uniquely positioned to do good and to help people.
“In our work, that means creating a quality infrastructure to help
people get where they’re going. To connect them to their jobs, their
family, their friends.
“In our business, it means ensuring that we treat every one of our
employees like family. Showing them respect, patience and grace.
“In our communities, it means taking what we’ve been given and
becoming more than a paving company. We have to become people At the intersection of Third and Jefferson in August 1947, a hard-
who are truly invested in the places we’re dedicated to improving. working crew placed shovelfuls of mix atop an interlayer to hold it in
“I hope that, throughout all the changes in our industry, we can place for paving.
all remember how important it is to connect people. And how bless-
ed we are to create those connections every day. cash flow, you can set up a paving business that will
“That’s been the best part of my career. Through the transition at last for generations. When it comes time to pass
our company, I’m encouraged to see that same passion in the next your legacy on to future generations, the transition
generation.” team you work with can ensure your commitment
to an industry and the people within it continues to
Find additional resources on TheAsphaltPro website in our flourish in your name. AsphaltPro Magazine is ex-
cited to be part of your journey, providing relevant
Off The Mat department at any time.
paving, production, training, and best practices ar- Rick Moore,
ticles to assist you along the way. When you need Chairman,
From a strong foundation that incorporates the building blocks extra training for your new hires, check out our on- Lehman-
of legal docs and insurances to the preparation for easy, sustainable line training course, as well. Roberts Co.