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6 Steps on How to Start a Successful Subcontracting Business

Contractor Tips , Posted by Charlotte Smith on

6 Steps on How to Start a Successful Subcontracting Business

General contractors may get all the credit for pulling off a successful project, but the subcontractors are the ones who build each moving piece. 

In construction, subcontractors can refer to construction workers, electricians, plumbers, HVAC, painters, etc. Any of the specialties are subcontractors for the larger vision that is the project. And without them, no project would succeed. 

Subcontractors are unique to this line of business. Often, they can complete distinct aspects of the job that the contractor themselves could not achieve alone. 

If you want to start your own subcontracting business, you’re in good company. But the road to success isn’t easy. Follow these six steps below and give yourself a head start building your business into something that can stand on its own feet. 

1. Get Your Contractor's License

In many states, general contractors have to pass an exam to obtain a contractor license. But many don't know that subcontractors also often have to pass stringent guidelines.

If you want to hire subcontractors or work as one, you have to get licensed in most states. 

Getting a contractor's license is no easy task. The process involves taking classes, completing an internship, and passing a grueling exam. And no two states have the same requirements.

In California, for example, some trades allow you to take the exam without any coursework or apprenticing. But in Iowa, all contractors, including subcontractors, need licenses to perform work if they expect to earn at least $2,000 a year. 

Regardless of where you obtain your license, the process will look something like this:

  • Take Classes

  • Once you know which trade you want to work in, find a trade school or accredited state school with a program in your field and start taking classes. Usually, there aren't many courses you need to take to qualify to take the license exam. You can complete some programs in as little as six months. 

    You'll simply want to acquire the basics of your trade before you start working in the field. 

  • Land an Apprenticeship

  • Some people move straight into apprenticing without taking any courses. Experience is life's classroom, so goes the saying. And there is no better way to learn your trade than to practice it. You're only going to get so much from a book.

    Most apprenticeships last somewhere between 1 and 5 years, but you'll be making wages while you learn. 

  • Take the Contractor's Exam

  • When you're ready to take your state's exam, submit an application to take the exam. Check with your state licensing board to determine how often they administer tests.

    Then, it’s time to prepare, prepare, prepare. The exam is grueling, and you don't want to have to take the exam more than once. 

    2. Register with the IRS and Receive an EIN

    Once you have your contractor's license, it's time to start setting up your business. 

    Before you take on any clients and perform any work, you'll want to get all the paperwork in order. Make sure that you have a standardized contract form ready to distribute, that your financials are in order, and that you're in good standing with the IRS.

    You'll want to register your company with the Internal Revenue Service as soon as possible so that you can get an EIN, or Employer Identification Number. This number is vital for tax purposes. You can find the EIN application on the IRS website.

    3. Collect References and Samples

    The best way to get new work is to show off your old work. If you've already completed jobs as an employee of another contractor, request high-quality photos of completed jobs. Collect testimonials from satisfied clients to place on your website and hang in your office. 

    Yelp is also a great tool to leverage toward getting new clients. If you leave clients overjoyed with the work you've completed for them, encourage them to leave you glowing reviews. According to one survey, 92% of people read reviews of local businesses before they decide to visit a store or service provider. You can't afford to have bad reviews!

    4. Diversify Who You Subcontract

    So you're an electrician and connected to others within your trade. You'll need to subcontract out other electricians with specialties that differ from yours. But think bigger.

    To land bigger, better-paying jobs, prove that you can complete projects that require much more than what your specialty enables. Hire subcontractors that can cover diverse aspects of complex jobs, and you'll land more contracts for more rewarding gigs. 

    5. Streamline Your Hiring Process

    Once you've got a solid clutch of subcontractors and clients lined up, it's time to grow. Don't stay comfortable. Build out your business, and hire more subcontractors from different backgrounds.

    To do this without majorly stumbling, organize your hiring process. Decide which online channels bring you the best client, experiment with hiring recruiters, and carve your interviewing process down to the most straightforward it can be.

    6. Treat Each Client Like They're Special

    Finally, if you want to build a thriving business, treat your clients well. They won't come back to you simply because of a job well done.

    They want to feel like they're working with a friend and confidante, someone who won't lie to them or fudge the numbers. Treat all your clients like they're special, and they may even refer their friends. 

    Building Something Impressive

    You can build your subcontracting business into something truly formidable. But you have to follow the right steps. 

    There is a lot of faulty and misleading advice out there. Subcontracting in the trades is important work too. It's not like messing up an omelet. If you mess up the measurements on a structure or the specifications on an AC install, the consequences could be dire. 

    Make sure you keep your books clean, keep your craft sharp, and learn how to hire people who do honest work. There are plenty of opportunities to discover in the subcontracting business. Start building yours today.