Building new or expanded buildings seems to be an unavoidable component of human development. Construction contractors are individuals and firms that construct residential and commercial constructions for their customers.
Table of Contents
Follow these ten steps to start a building contractor business:
Make a plan for your construction contractor business.
Create a legal entity for your construction contractor business.
Register your Construction Contractor Company with the IRS.
Create a Business Bank Account and a Credit Card
Create Accounting for Your Construction Contractor Company
Get the Permits and Licenses You Need for Your Construction Contractor Business
Purchase Construction Contractor Commercial Insurance.
Define your Construction Contractor Company Brand
Make a website for your construction contractor business.
Configure your Business Phone System
Starting a company entails more than just registering it with the state. This straightforward guide to beginning a building contractor company has been put together by us. These stages will guarantee that your new company is well-planned, correctly registered, and legally compliant.
STEP 1: Make a business plan.
A well-thought-out strategy is vital for entrepreneur success. It will assist you in mapping out the intricacies of your organisation and uncovering some unknowns. Consider the following crucial topics:
What are the initial and continuing expenses?
Who is your intended audience?
How much money may you charge your customers?
Fortunately, we have done a lot of the legwork for you.
What are the expenses associated with starting a building contractor business?
It will not be inexpensive to start your own contracting firm. To make people aware of your company, you’ll need professional grade tools and equipment, business permits and insurance, including workman’s comp, as well as advertising. You’ll also need dependable transportation and a trailer to move supplies, tools, and other job-related equipment (s). Finally, you’ll need a business phone and a website to connect with and communicate with customers. Start modest at first, and then scale up as the job becomes more consistent. A starting budget of $10,000-15,000 will get you started, but be cautious not to overspend if you don’t have business to support your bottom line.
What are the continuing costs of running a building contractor’s business?
The majority of recurring costs are likewise job-specific. Material and equipment expenses will always be a part in your overall budget. Communication and promotion will continue to be expenditures, as will the upkeep or replacement of equipment and materials. As your company expands, you may want to hire more employees, a bookkeeper, or subcontractors to undertake specialised jobs such as painting, electrical, plumbing, or HVAC installations.
Who is the intended audience?
Individuals and families with adequate ongoing assets to develop will be your target market. Clients who have just enough money to complete a project will often get concerned about the money spent on the assignment. This may lead to them cutting shortcuts or putting a work on wait indefinitely. This kind of instability will rapidly damage your company. A customer’s bottom line must be financially stable enough that they can consistently contribute cash to keep the project rolling, regardless of the economy. As a result, you must consider your customers’ entire financial sustainability as part of your evaluation. Consider them a business partner while you finish their job.
How does a building contractor earn a living?
Construction contractors are paid to initiate, continue, and finish a construction project. Money is provided beforehand to purchase supplies and pay people in order to begin the job. The client is subsequently invoiced on a regular basis for the ongoing work and supplies, as well as at the end of the project. The contractor will be paid once all other invoices and personnel have been paid.
How much money may you charge your customers?
Customers are charged on a job-by-job basis, which means that the scope of the project influences much of the cost. You must also decide on an hourly rate for your workers and a pay for yourself. All other expenditures will be related to supplies, labour, and day-to-day intangibles required to keep the task going ahead, therefore your compensation will represent your net profits. To determine a baseline estimate for your job, research other contractors and contractor firms in your region. Be competitive, but don’t undercut or overcharge your competitors.
How much money can a building contractor make?
Because success in the building contractor industry does not come fast, you may go for many years with minimal net profits. The majority of earnings will be reinvested in the company’s development and success. Contractor employment, if established, may be profitable, with firms making $100,000 to $1 million per year.
How can you increase the profitability of your company?
Some contractors “lend” their contractor licence to other companies. You, as the contractor, get the necessary permits and charge a fee for this service. Make sure you trust the people working under your licence and, if feasible, establish a contract with them.
Another way to expand your company is to specialise in your field. Trim carpentry, masonry and tile work, renovation, and outside structure building, such as decks, fences, docks, and gazebos, will all need a contractor’s licence but may be lower-cost projects. These are particularly useful during slow times in the economy and in the work calendar of your company.
STEP 2: Establish a legal entity
Sole proprietorship, partnership, limited liability company (LLC), and corporation are the most frequent business structure forms.
If your construction contractor firm is sued, forming a formal business organisation, such as an LLC or corporation, prevents you from being held personally accountable.
STEP 3: File your taxes
Before you can begin for business, you must register for a number of state and federal taxes.
To register for taxes, you will need to get an EIN. It’s really simple and completely free!
Taxes on Small Businesses
Depending on the business form you choose, you may have multiple choices for how your company is taxed. Some LLCs, for example, may benefit from being taxed as a S company (S corp).
These guides will teach you more about small company taxes:
Taxes on LLCs
LLC vs. sole proprietorship
Corporation vs. LLC
S Corp vs. LLC
How to Form a S Corporation
S Corporation vs. C Corporation
There may be state taxes that apply to your company. In our state sales tax guides, you may learn more about state sales taxes and franchise taxes.
STEP 4: Establish a company bank account and credit card
Personal asset protection requires the use of distinct business banking and credit accounts.
When you combine your personal and business accounts, your personal assets (your house, vehicle, and other possessions) are at danger if your company is sued. This is known as penetrating your company veil in business law.
Furthermore, understanding how to develop corporate credit may help you get credit cards and other financing in your company’s name (rather than your own), lower interest rates, larger lines of credit, and other benefits.
Establish a business bank account.
Opening a business bank account is not only required when asking for business financing, but it also:
Separates your personal assets from the assets of your firm, which is required for personal asset protection.
It simplifies bookkeeping and tax reporting.
Create a net 30 account.
Net 30 accounts are used to develop and grow company credit while also increasing cash flow. Businesses use a net 30 account to purchase items and refund the whole debt within a 30-day period.
Many net 30 credit suppliers submit information to the main business credit agencies (Dun & Bradstreet, Experian Business, and Equifax Business Credit). This is how firms establish business credit in order to get approved for credit cards and other lines of credit.
Apply for a business credit card.
Obtaining a business credit card benefits you in the following ways:
Put all of your company’s costs in one location to separate personal and business spending.
Build your company’s credit history, which will be important for raising funds in the future.
STEP 5: Establish business accounting
Recording your numerous costs and sources of revenue is crucial to assessing your company’s financial status. Keeping precise and thorough accounting also makes yearly tax filing much easier.
STEP 6: Obtain all required permissions and licences
Failure to get appropriate permissions and licences may result in significant penalties or possibly the closure of your firm.
Requirements for State and Local Business Licensing
A seller’s permit is required in most states for retail companies. A seller’s permit allows states to record and collect taxes on taxable products and services sold. More information is available here:
Sales Tax Institute – Sales Tax Frequently Asked Questions
SBA 101: Sales Tax
For information on local licences and permissions, visit:
Check with the clerk’s office in your town, city, or county.
Contact one of the local organisations mentioned in the US Small Business Associations database of local business resources for help.
Occupancy Certificate
A construction contractor’s office is usually a storefront or a mobile trailer. A Certificate of Occupancy is often required for businesses that operate from a physical site (CO). A certificate of occupancy certifies that all building rules, zoning laws, and government requirements have been satisfied.
If you intend to rent a space:
In most cases, it is the landlord’s obligation to get a CO.
Before leasing, ensure that your landlord has or can get a valid CO for a building contractor company.
A new CO is often required after a big remodelling. If your location will be refurbished before opening, incorporate wording in your leasing agreement saying that lease payments would not begin until a valid CO is given.
If you intend to buy or create a location:
It is your responsibility to secure a valid CO from a local government entity.
Examine all building regulations and zoning restrictions for the area of your construction contractor firm to verify compliance and the ability to acquire a CO.
STEP 7: Obtain commercial insurance.
Insurance, like licences and permits, is required for your company to operate safely and legally. In the case of a covered loss, business insurance protects your company’s financial well-being.
There are several sorts of insurance plans designed for various types of companies with varying risks. If you are unaware about the hazards that your company may encounter, start with General Liability Insurance. This is the most popular coverage required by small companies, so it’s a good place to start for yours.
Workers’ Compensation Insurance is another important insurance product that many companies need. If your company will have workers, your state may require you to purchase Workers’ Compensation insurance.
STEP 8: Establish your brand
Your company’s brand is what it stands for, as well as how the public perceives it. A strong brand will help your company stand out from the crowd.
How to Promote and Market a Building Contractor Business
Marketing and advertising your construction company will be an important initial step, as well as an ongoing component of your company’s success. Although word of mouth and personal recommendations may be your most potent marketing strategies, your reputation will not be built when you initially start. Incorporate social media sites into your marketing strategy. This is a low-cost and effective technique to publicise a new company. You will most likely need a company website as well. This provides a point of contact for consumers as well as a showcase of your work.
Join trade associations like the Associated General Contractors and the Associated Builders and Contractors, Inc. These organisations are intended to aid new and seasoned builders equally, and they often help prospective clients locate you or enquire about your work history. Linking to these sites on your website also helps to establish your credibility in the eyes of prospective buyers.
Consider business cards, brochures, posters, and signs for your office and work locations as well. When a prospective consumer sees your work and immediately associates it with a company name, you have a significantly greater chance of winning the business. Cards and fliers are ideal for first meetings and quotations, and many contractor supply companies will let you display one for consumers to view and keep.
How to Keep Customers Returning
A company’s reputation is important in recruiting new consumers and gaining recommendations or more business from existing clients. But how can you go about establishing a strong reputation? The completed product will play a significant role in the customer’s pleasure. However, the connections you develop with your customers will be as vital. Referrals and call backs will increase when your clients know they can rely on you and that you will provide a high-quality product. Overpraise but underperform. Be nice and polite, but keep in mind that this is a company and you can’t please everyone. Be open and honest about what you can do and how much it will cost. A consumer is considerably more likely to accept an initially high number than additional dollar amounts throughout the project. You and the customer will understand what is required, what can be anticipated, and when the project will be done if you maintain communication open and reasonable.
STEP 9: Create your company’s website.
After you’ve defined your brand and designed your logo, the next step is to build a website for your company.
While developing a website is an important step, some may be concerned that it is out of their grasp due to a lack of website-building skills. While this was a fair concern in 2015, online technology has made significant advances in recent years, making the lives of small company owners considerably easier.
The following are the primary reasons why you should not put off developing your website:
Every genuine company has a website, period. When it comes to bringing your company online, it doesn’t matter what size or sector it is.
Social media accounts, such as Facebook pages or LinkedIn company profiles, are not a substitute for your own business website.
STEP 10: Install your company phone system.
Getting a phone for your company is one of the finest methods to keep your personal and professional lives distinct and private. That isn’t the only advantage; it also helps you automate your company, provides it legitimacy, and makes it simpler for prospective clients to identify and contact you.