More contractors are starting their own general contracting businesses than ever before, and for a good reason. This venture allows contractors with an entrepreneurial spirit to get out there and build something they are proud of.
However, starting a business is a much larger feat than people think. There is so much to consider beforehand to ensure everything goes off without a hitch, and not knowing where to start may be enough reason to scare you from trying to create your own company.
How to Start a Contracting Business
Starting your own contracting business allows you to be your own boss and to have independence in how you run your own business. However, there are many steps to take to get to the point of opening your own business.
That’s why we have created a list of things you need to consider so that you start your general contracting business heading in the right direction.
Before You Find Out How to Start a Contractor Business First Consider “Why”
Before beginning any business venture, you must take the time to consider your “why.”
As a contractor, there is a lot of competition from large, experienced businesses. What is your reason for wanting to break into the field with your own company? This answer will drive you to compete and push through the obstacles.
Perhaps you have some unique services to bring to the table. Or, maybe you live in an area where big construction businesses are not as readily available to supply the needed service.
Regardless of what your reasons may be, think of this first. Focus on this driving factor as you work through the first steps of establishing your own business as a contractor.
Make a Business Plan
Making a business plan is guaranteed to help you go much farther than you would have without one. It can be overwhelming to consider everything you must do but trust us: a well-thought-out plan will be one of the best assets to your general contracting business!
Many contractors are going to start out with a small business that services a select group of clients. So, you need to know who you intend to build for and what it takes to be a contractor and business owner in a long-term scenario.
Do some research and study construction businesses that have come before you. Also, this is the time when you should decide on a business name and work on the early stages of developing your brand as a contractor.
General contractors have a lot to consider as they set out on this business venture. So, set aside an adequate amount of time to go through everything from potential clients to an in-depth marketing strategy.
Create a Budget and Timeline for Your Contractor Business
Budgeting is equally as important as creating a business plan.
In many cases, you probably won’t see a whole lot of money rolling right after you have opened your business. You have to be prepared for this lack of income while building your company as a contractor! This should all be laid out in your business plan and thoroughly researched so that there are no surprises.
Contractors need to be very clear with their budgeting and take everything into account. From equipment to insurance policies, there are many things to consider. Create an itemized list to keep things well organized.
It may take some time to see that cash flow that you are so eager to obtain. But – believe us – a well-planned and thought-out budget will ease your worries and prepare you for future financing.
Begin the Search for Potential Clients
Businesses thrive only when they have a solid group of customers. You can’t be a contractor without customers, so don’t assume that this step will come easy.
In the beginning stages of your company, customer service is everything. Word travels fast, and you need to make sure that you are treating any potential clients with a great deal of respect and sincerity. Customers will play a huge role in your success rate, so don’t take this responsibility lightly.
Contractors should know how important it is to develop relationships with their clients. Many projects that contractors oversee, such as building a home or office, will be deeply personal and important to the client. You must develop a healthy working relationship early on as the business owner.
Know the Legal Requirements on How to Become a General Contractor
The construction industry is a dangerous field and often requires heightened insurance and hazard protections for contractors. You will need to know the exact legal requirements to meet if you want to run a general contracting business.
Insurance PoliciesAs a general contractor with your own company, you will need to start with learning about insurance policies. Small business insurance policies are required as well as a general liability insurance plan to protect you and your crew as they are in the field working.
General contractor insurance policies will protect you and other contractors that you hire. It is important to note that some insurance policies can be rather expensive. Take all insurance costs into account during the budgeting stages.
These insurance policies may seem like quite an investment, but they are there to protect you from any issues down the line. It is absolutely necessary to have these insurance plans up and running before you start on any projects – do not cut corners here!
Federal RegulationsAll states require that certain rules be followed so that the job is done safely and up to code and that all contractors are protected by these insurance policies. The construction industry has a lot of legal requirements that you must meet, so do your research and know what to expect as you look to starting your first projects.
Look into Types of Contractor Licenses and Permits for Your Company
In addition to insurance policies, there are also many licenses and permits you need to work as a general contractor and run your own business.
While many people work in the field without these contractor accreditations, there is strong evidence that shows you are more likely to succeed if you have them.
As a contractor and business owner, it is in your best interest to acquire these licenses so that you stand out in the overly crowded and competitive field of contracting. These licenses will help you to develop a specialized skill set and equip you with the knowledge needed to handle any project that comes your way.
Contractors may not need the licenses to practice, but we guarantee you that there is a true benefit to getting them, especially for business owners.
In addition to licenses, you’ll need some permits for certain projects. In many cases, you will have to apply for these permits, which can take some time. Once you are cleared and have received the needed permits, you can build under the determined circumstances in which you applied for the permit.
It is important that you take these requirements seriously so you don’t face any repercussions down the line.
Register Your Contractor Business
In order to work as a contractor, you will need to have a licensed business in the jurisdiction(s) you will be working. For most contractors, this means registering your business federally with the Internal Revenue Service as well as locally with the state government and local city or county government for 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 in order to hire employees and conduct other business.
Note: if you plan to work as a contractor in multiple states, you will need to be sure your business is registered within each of those states to maintain compliance.
Implement Your Marketing Strategy
Marketing is another strategic aspect of the planning process. It will make a huge difference in your business’s success rate. The construction industry is beginning to understand the importance of digital marketing. You can get an early start and stay ahead of the game if you develop a marketing strategy.
You can go about this in a couple of different ways, but social media is a great tool to use as you work on getting your company name out there. Social media will help you define your target audience to focus your marketing efforts on people who are more inclined to pay for your services as a contractor.
This will also help you drive in a lot of business and will solidify your company as a viable choice for people in need of a contractor!
Purchase Equipment and Start as a Contractor
You are finally nearing the final steps on your journey to becoming a contractor and owning your own business! Once you have developed a plan, done your research on the contractor insurance policies, required permits, and have perfected your marketing strategy, you are ready to finally purchase the materials needed to get building.
During this stage, it is best to think about your company long-term and invest in equipment that will service you for many years to come. It may be a hefty investment up-front, but equipment is incredibly valuable and can help you to perform better. It’s what you need to add some credibility to your company name.
Again, research is your best friend. Find out what equipment you need and see which contractor equipment businesses are best rated for the specific pieces that you are looking for.
The Bottom Line of Starting a Contractor Business
Starting out as a general contractor is a very exciting time, but there are many things you need to consider before launching your own business. You may need extra guidance that this guide does not cover, including information on exams, studying materials, etc.
Get in touch with Contractor Training Center. We can help you to prepare by leading you through licensing prep courses for your exams and will supply you with a large database filled with helpful reference materials.
We want to help you succeed with your business and give you the tools to become a successful contractor. Call us today to learn more about our services, exam prep courses, and studying materials!