Starting a contracting business is a great way to get out of the rat race and make money from your trade. Contracting can be a very viable business model with lots of demand and potential for growth when scaled properly. However, many mistakes can be done along the way that could not only stifle your business’s development but grind it to a screeching halt. Here are some of the most important things to consider before starting a local contracting business.
Get the Right Experience Before Starting a Local Contracting Business
It would be wise to get some experience under your belt before you start a contracting business. You should try to get at least 3 years of real work in the trenches before you start. The last thing you want is to be the least experienced person on your crew. You should also take the time to familiarize yourself with things like bidding, blueprints, contracts, and working with subcontractors.
Form the Business
Make your business official. Have a name and incorporate your company with the secretary of state. The best structure to start a contracting company is an LLC since you’ll be taking significant debt when working on projects, hiring subcontractors and dealing with a wide variety of different customers. An LLC will allow you to get the personal protection a corporation offers with the flexibility of a sole proprietorship.
Get a Line of Credit
Like we mentioned earlier, you will have to be able to have some working capital on hand when working on projects. Call a commercial banker in your area who’s familiar with contractors. Make sure you have a good business plan and start shopping for a good line of credit online. Once you’re approved, you’ll be able to start working on jobs.
Many states will require that all contractors have a license. You should contact either your governor’s office or secretary of state and ask what licenses are required of you if any. And some states will have multiple licensing classifications, so things might get complicated.
In most cases, you’ll be required to complete a formation and pass an exam. Get the proper license application and make sure that you complete each and every document according to the guidelines.
A lot of things can go wrong on a project and contractors absolutely have to get the proper coverage before they start. As a contractor, general liability insurance for small business is essential and will cover injury and damage to other people. You’ll also to check about surety bonds as they will protect your clients from any error your company might commit.
Get the Proper Equipment
Make an inventory of the tools you already have and those you need. If you have a piece of equipment that is missing, check if you can rent it instead of buying it. You should also start looking for good suppliers. Work with suppliers that give out price-point discounts especially for contractors. Open as many accounts as you can but try to build a solid relationship with those who offer you the best deals.
Start Marketing Your Services
Once everything is in order, it’s time for you to start marketing your services. Get to know as many people as you can in the trades as referrals are usually the way contractors start building a name. You should also register with your local chamber of commerce and home builders’ association. Printed ads work especially well for contractors and advertising in construction trade and real estate publications is a great way to reach your target audience.
Starting a contracting business can be very profitable provided you do it correctly. Make sure that you follow these few steps if you want to start your operation on the right foot.