How to Start a Contractor Business in 10 Steps

Do you want to be your own boss and gain financial success in the construction industry? Now may be an exciting time to start your own general contracting business. Starting a business is no small feat, but if you are ready to take on the responsibility—and reap the rewards—of owning your own company, follow these steps to get on the path to success. Here is a step-by-step guide on how to start a contractor business.

If you think you're ready to get started applying for a contractor's license, book a 30-minute call with our licensing experts to ensure you meet the necessary requirements and sort out your next steps in the process.

Note: This article is focused on how to start your own general contracting business. If you are a subcontractor, check out our guide, 6 Steps on How to Start a Successful Subcontracting Business.

Step 1: Gain Experience

Before you dive into starting a contractor business, you will need to gain experience in the field. This will also give you a chance to get a feel for the industry and figure out what types of projects you might want to focus on when you own your own business.

Depending on what state you live in, you may be required to have at least 4 years of construction experience before you can get your contractor license. (More on that below.)

Interested in getting your contractor license? Contact us to book your start-up consultation today to get started now!

Step 2: Make a Business Plan

Preparation is key when starting a business. Get your ducks in a row by creating a well-thought-out business plan, and you will be far more likely to succeed.

In the beginning, you may want to start out with a small business that services only a select group of clients. So, figure out who you intend to build for and what it takes to be a successful contractor and business owner in that niche or specialty area. Research well-known contracting businesses in your area to see how they operate. Also, talk to some established general contractors and ask for tips and lessons they have learned along the way.

Once you have a clear idea of where you are heading, take the time to plan out your budget and timeline, identify potential clients, and develop a marketing strategy.

Step 3: Choose a Business Name and Domain

As you work on the initial stages of setting up your business and developing your brand as a general contractor, an essential step is to decide on a business name. Before you settle on a name, check for available website domains and be sure to purchase a domain name that matches the name of your company. (For example, if you want to name your business XYZ Construction Company, you might purchase the domain XYZConstruction.com). This will make it easier for potential customers to discover you online.

Step 4: Register Your Contractor Business

To work as a contractor, you will need to have a licensed business in the jurisdiction(s) in which you will be working. For most general contractors, this means registering your business federally with the IRS and locally with the state and local governments, which often require additional business permits.

Once you register your business and select an entity type, such as Limited Liability Corporation (LLC), Partnership, or Sole Proprietorship, you will receive an EIN (Employer Identification Number) that is needed to hire employees and conduct other business.

If you plan to do contractor work in multiple states, you will need to register your business within each of those states to maintain compliance.

Step 5: Get Business Insurance

You will be required to show proof of insurance when applying for a general contractor license and establishing your business. General liability insurance is strongly recommended, and you may want to consider workers’ compensation insurance as well. You can also explore a business owner’s policy that bundles multiple types of insurance coverage.

Remember, the construction industry is a dangerous field. It is necessary to invest in an insurance policy that will protect you and other contractors you hire.

Step 6: Get a Business Bank Account

Get set up to purchase equipment, pay subcontractors, and receive payments from customers by opening a business bank account. Additionally, you’ll want to open a business credit card and set up some form of accounting system to keep track of all income and expenses.

Step 7: Buy Equipment

Next, purchase the materials needed to start building. Think about your long-term goals and invest in equipment that you will use for years to come. Equipment may be a big up-front investment, but it’s highly valuable and can help your business perform better and faster. Research what equipment you need, and which construction equipment brands are best rated for the pieces that you are looking for.

Step 8: Get Your General Contractor License

Once you’ve gained work experience, formed a named entity with a business license, obtained insurance, and purchased equipment, it’s time to get licensed. By earning your general contractor license, you will set yourself up for success by showing that you are a responsible contractor who can be trusted to get the job done right. People will be willing to pay more money for building projects performed by a contractor they trust.

As part of the licensing process, you will need to pass the National NASCLA Commercial Builder Exam. You may have heard the NASCLA exam is grueling, but it doesn’t have to be. Contractor Training Center offers exam prep instruction, reference materials, and application assistance services to help you pass the NASCLA exam and get that license.

Contractor Training Center has dedicated licensing specialists who are ready to help you succeed. Purchase a Start-Up Consultation to get started today!

Step 9: Hire Subcontractors

You will likely rely on subcontractors to complete much of the work on your projects. Since their work will reflect on you, take the time to hire the right people with the right skills and a solid reputation.

You might choose to hire your own employees, work with independent contractors, or outsource work to multiple subcontractors. Either way, make sure you are aware of the tax implications and legal formalities of hiring and paying your crew.

Step 10: Find Customers and Get Started

As soon as you get your license and have your crew in place, you can hit the ground running. When you’re just starting out, be proactive by reaching out to former employers and other people in your network who are familiar with your work. Ask for referrals so you can land that first job and start building!

Take a look at our Business Accelerator Program to hit the ground running with our elite business coaching for contractors like you!

Remember: Your general contractor business will be built on trust. Make customer service a top priority with every job you do, and your business will grow through word-of-mouth referrals. Additionally, you’ll want to implement the marketing strategy you laid out in your business plan. Every time you complete a job well done, take photos to post on your website and ask the customer if they’d be willing to write a positive online review.

At Contractor Training Center, our expert instructors can help guide you on your journey to starting a contractor business. We want to help you succeed with your business and give you the tools you need to become a profitable contractor. Contact us today to learn more about our services, exam prep courses, and study materials—including tabbed and highlighted books to help you pass your licensing exam with confidence.