Starting your own contracting business is an important step in advancing your career.
Owning your own business has benefits that range from being your own boss to having the ability to take on any jobs you like, flexibly. Many companies prefer to hire out for contracting and construction versus hiring a full-time employee. These companies want someone who knows all the contractor tips and tricks without the burden of training and supplying prolonged benefits package.
The increased popularity of hiring contract-based workers is one of the reasons the entrepreneurial world has grown to approximately 400 million in size. If you have the skills and experience in construction, creating your own contracting business is a great choice to better your future.
Don’t be scared away by all the red tape of starting your own company. We have curated a beginner’s guide with contractor tips to creating your own business.
Settle on Your Available Services
When you tell someone you are a contractor, they will picture dozens of projects you may be able to do. If you want to be a general contractor who hires subcontractors to cover all bases, that’s great! However, if you have a specific set of services you want to offer, it is important to let potential clients know.
One of our first professional contractor tips is to be completely settled on the services you are going to offer before making your business plan. This decision will completely alter your licensing, financial, and supply needs.
Here are a few areas you might specialize in:
Electricians are highly sought after in the contracting world. Likely because virtually every construction project needs an electrician. Some contractors opt to offer exclusively electrical work, but the service also pairs well with others like construction and heating.
Carpenters and Construction workers are the backbone of the contracting world. In fact, many general contractors get their start in carpentry because the skills transpose so seamlessly to other service areas.
Plumbing work often gets split into two separate areas – residential and commercial plumbing services. Residential plumbing is an important service and many contractors have built successful businesses by exclusively offering this type of service. However, commercial plumbing is a skill many general contractors like to offer because it helps open doors to huge projects.
HVAC Duct Work
Heating and air conditioning contractors are always in demand because their services are used in most, if not all, modern constructions. HVAC contractors often work in tandem with electricians, which is something to keep in mind if you plan to become a general contractor.
An interior contractor is the person who takes an interior designer’s vision and brings it to life. All the intricate, constructed design elements that bring the vision of a space together are a part of an interior contractor’s repertoire. Typically, these contractors are talented carpenters who are skilled in painted, drywall, and general construction.
Other Niche Areas
There are dozens of other areas in which a contractor may work. One might choose to start their business as a roofing contractor, pool builder, landscaper, or so many other choices. The most important thing to remember is to focus on an area you love so that you don’t invest your time into a career you grow to despise.
Create a Business Plan
A business plan is a vital step for anyone starting their own business, but even more so for contractors. The reason it is at the top of our business-owning contractor tips is that it can help organize the dozens of details that go into being financially and legally prepared to begin work.
A business plan consists of a few basic elements. The best way to build the business plan is to slowly work through each section.
- Executive Summary: A brief synopsis of your business and goals. Consider it a pitch to grab the attention of any potential investors.
- Business Description: This is where you use the decisions made in our professional contractor tips, step one. What services do you offer? Where do you plan to offer your services? What does your target community look like and what is the demand for your services? Also, include details about your professional experience to highlight your field expertise.
- Company Structure: Explain that you are running your own business and include information on any partners or outside funding. Don’t be afraid to include curriculum vitaes for anyone involved in the business.
- Marketing Plan: How are you going to find, entice, and maintain clients? Do you have any plans for marketing digitally? You may not feel ready to discuss an entire marketing plan, but showing you have a general idea of the type of marketing that works in your market is something investors want to see.
- Funding Needs: Discuss the type of money you will need to get your business off the ground. Consider the cost of startup equipment like utility trailers, tools, protection equipment, etc. If you have some funding already arranged, include that information here.
- Financial Projections: Do some market research to create a projection of revenue over the first 12 months. Then, include projections for the next 3-5 years as well.
- Appendix: This is an optional section where you can include any supporting documentation for the information in the business plan.
Register for Licenses and Tax IDs
If you are beginning a contracting business, chances are you have previous experience in a trade field of some sort. So, you are likely not surprised by the fact that there are many different forms of licensing required for different fields.
Electricians and plumbers fall under general tradesmen licensing. You may need a business permit specific to the area where you plan to house your company. You might even need a license that is state-specific. That’s why it is so important to check with your local government to inquire about any necessary licensing.
You will also need to register your business and apply for your tax identification numbers, which will allow you to pay taxes, hire employees, and more.
Learn Local Regulations
Contractors and construction workers are very heavily regulated, which is no shock. You need to look into local regulations as well as federal which may cover things like efficiency, waste, safety, and more.
Regulation guides can be found through your local government or the Small Business Administration’s website.
No matter what kind of business a person owns, they need to take the proper precautions and protect themselves from expensive road bumps. Of all our contractor tips, this might be the one to save you the most money in the long run.
These are the three main forms of protection we recommend for contractors:
1. Get Insured
There is a wide array of insurances you will need as a contractor. You will need to ensure work vehicles, workers and subcontractors, properties, and more. Dependent on your location, you will also need general liability insurance, worker’s compensation insurance, unemployment insurance, and even disability insurance.
Sure, it seems like a lot. But don’t try to skirt around acquiring appropriate coverage. The reason this makes our contractor tips is that the price of paying for insurance is nothing compared to the cost of covering damages, injuries, and more without it.
2. Lawyer Up
You may not see a need for keeping a lawyer on retainer, but they can be incredibly helpful. Lawyers are perfect for ensuring your licensing is thorough and you are meeting proper regulations. Additionally, if a subcontractor hires a work injury attorney during a worker’s compensation dispute, you don’t want to be left representing yourself.
3. Hire a CPA
There is a lot of work that goes into running a contracting business. If you are not familiar with the complexity of tax regulations, deductions, general bookkeeping, and other financial details, you may benefit from hiring a CPA.
These tax and finance professionals can help you make decisions for your business that will positively affect your revenue. Additionally, having a CPA to monitor your bookkeeping can help you detect discrepancies quickly. While this is one of the few contractor tips that are truly optional, we highly recommend you give it a shot.
Get Your Name Out There
You might be the best contractor in the business, but if nobody knows about you, you won’t get any clients.
There are a few ways to go about advertising your business, but the two most affordable methods are word of mouth, and digital marketing.
Word of Mouth
Word of mouth marketing is an old school technique that still holds a lot of value in the modern age. Keep professional business cards on you and pass them out to anyone who mentions needing a contractor or knowing someone who needs a contractor.
Additionally, implement targeted efforts. Create a Facebook, LinkedIn, Instagram, Twitter, and any other social media page you can think of. Ask clients to leave public reviews on your pages and get friends and family members to share your profile and posts.
Word of mouth marketing focuses on creating a client community built on trust and is shown to be extremely effective, especially for business owners working in a specific community. In action, it might look like someone mentioning their future plans for a basement remodeling to a friend who tells them about your company. This type of classic marketing is wonderful because it can be done without spending a dime.
Don’t be confused, some word of mouth marketing happens digitally. However, when we refer to digital marketing, we are talking about running a website and using SEO (search engine optimization) and paid ads to drive traffic to you.
Though there are a lot of options these days to build websites for free, hiring a custom web designer may still be the best option. Having your webpage custom built is on our list of contractor tips because a web designer can utilize their knowledge to create a website that will perform well regarding SEO.
This means that when people search for things like emergency plumbing, your website will pop up at the top of their search results. This can drive hundreds of people to your website and, in turn, you will gain a large number of clients.
Bonus Tip: Everything is Negotiable
Looking to save a little money for your business? Remember the most golden of contractor tips: “everything is negotiable.”
The market for construction supplies is every fluctuating and can often trend toward being very expensive. It is important to remember that suppliers are in direct competition with other suppliers and therefore are open to negotiation.
The key to negotiating prices is to understand that suppliers have to turn a profit, so don’t low-ball your offers.
Here is an example:
You are looking to buy boat deck building supplies. There is only one local supplier that sales the specific marine vinyl you need, but their prices are 15% higher than at a store a few hours away.
You know that you don’t need the local supplier to take the price all the way down to the price of the distant store because you would be paying an increased price for delivery with the other supplier. That gives you room to wiggle when negotiating prices without worrying about asking the supplier to take a loss.
At the end of the day, you are looking for three things:
If you push for too low of a price, the supplier can only ever match two of those three items. Instead, focus on building a good rapport with the supplier. Pay your bills promptly, assure the supplier that there will be a limited amount of returns and build-site pickups, stay loyal to them as an exclusive supplier, and stay friendly with the staff.
If you have a good relationship with a supplier, they will be more open to lowering the cost of items without skimping on quality and quantity.
Enjoy Being Your Own Boss
Working in construction and other trades is a grueling job with long hours.
However, running your own contracting business gives you the freedom to plan jobs, hire subcontractors, organize the construction, and hold all the power. It can take a hard job you were good at and turn it into a dream career you are great at. It might be scary, but it is worth it to take the dive. With some patience, research, and perseverance, you can make that dream come true.