As per the recent IBISWorld survey, it has been predicted that the next five years will be more favourable towards robust growth for commercial construction companies.
There will be more housing demand for business office space and business efficiency by looking at the number, especially for retail buildings. So, if you are ready to move your first step into the construction industry, trust me, it’s a perfect time.
You might be wondering how you can initiate, what the costing parameters are, and what to include in the business plan for starting a business. Don’t worry! We are here to clear all your doubts as we have an expert guide on how to start a general contracting business from scratch.
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Who is a Contractor?
A contractor is one such individual responsible for handling all the business aspects related to daily activities. In simple words, we can say that general contractors or construction contractors are only the general contracting business. The contractors play a vital role in the construction business, whether residential or commercial structures.
The general contractors have a team of employees, laborers, carpenters, and other workers and also play a role like a project manager and Construction Superintendent.
Moreover, contractors also involve multiple specialty subcontractors (SC) who complete 80-90% of the work.
How to Start a General Contractor Business? – 8 Easy Steps to Follow
Let us now start our journey to see the step-by-step guide to start a new general contracting business from scratch.
Step 1: Make a Business Plan
One of the first and most essential things that a business owner needs to perform is to make a solid business plan for starting a general contracting business.
A business plan is beneficial for business as it defines a roadmap for your business success. It also helps you gain a better understanding of goals and works as a proof of concept.
When a general contractor or business owner applies for small business loans, a business plan plays a significant role. The financial enterprise and investor ask for a business plan.
When you create a business plan for the first time, make sure the following components are mentioned in the plan.
- The overall structure defining the business idea
- Essential information, including goals and vision to start your business
- The list of service offering
- Complete information about the target market
- Number of employees working in your business
- Details on startup costs like maintenance, licenses, permits, and others
- Financial projections like expected profit-margins yearly or monthly
So, the business plan is nothing but the blueprint that highlights all the essential information about your business in a well-defined and straightforward manner.
Step 2: Obtain Necessary Licenses, Insurance, and Bonds
The most exciting part about the contracting business is that you also need to get a general contractor license. You will find that many states may ask the business owners to provide them with the contractors’ license.
By not having the contractor’s license may result in a massive disaster in your business. So, it’s better to have a license for contractors and the process to apply for the same may differ from state to state.
Generally, the process goes something like this:
- A written exam is taken to make sure the contractors can deal with various contracting fields.
- By assuring that your financing condition is adequate to start a new business.
- By showing the authorized person the reference letters from previous employers, banks, clients, and even colleagues.
- Finally, by providing proof that you possess on-the-job expertise.
General building contractors, general engineering contractors and specialty contractors are some of the contractors’ classifications.
The specialty contractors are suitable for working on departments like insulation and acoustical contractors, concrete, drywall, fire protection, flooring and floor covering, building moving and demolition, plumbing, earthwork, and paving fencing, masonry, roofing, and even structural steel.
Apart from licensing requirements, make sure you have legal surety bonds. Construction bonds are mandatory for every general contracting business to operate.
The main aim of having surety bonds is to give your customers protection if they are not fulfilling the contractual obligations. Like insurance, a third party will provide your surety bonds, and it becomes mandatory to follow state regulations, which vary from state to state.
Last but not least, you must have business insurance. There are different policies available by many insurance companies to purchase, which depends on several essential factors. The primary role of insurance is to offer coverage to your employees or clients.
In addition to general liability insurance, a contractor must have property insurance and company vehicle insurance.
If your business has more employees, you can also opt for insurance to protect your workers for:
- Workers’ compensation
- State disability insurance
- Unemployment insurance to protect your workers.
Also, a Certificate of Occupancy (CO) is essential. It confirms that all building codes, zoning rules, and government regulations are considered, and your business runs out of a physical location.
Step 3: Open a Business Bank Account
Opening a business account is the essential step that you need to perform. Many construction businesses are making a common mistake of using personal accounts for managing the financials.
It is better to keep separate personal and business accounts; otherwise, there are more chances of risk when your construction industry is sued. It is referred to as piercing your corporate veil. It is also necessary for personal asset protection, which in turn makes accounting and tax filing.
If you open a business bank account, then you can easily do the following activities:
- Perform payment processing under the business name
- Personal asset protection
- Generate credit
Apart from an account, having credit cards and other finances in your business name can help you with better interest rates, higher credit lines, and many more.
So, if you have a business credit card, you can easily manage separate accounts for personal and business expenses.
Step 4: Develop and Define Your Brand
To be on top of the competition, creating strong branding for your business is very much essential. The branding represents explicitly your company’s value, services, goals for customer satisfaction, and most importantly, business success.
For developing a strong brand for your construction industry, there are some essential steps that you need to follow.
First of all, you must create a business logo. It is essential not only for marketing strategies but also to create a strong impression on customers. In short, your logo should define what your business is and what you offer.
Once your brand is ready, start promoting your construction business. The promotional activities help you to get more customers as they remember your business. You can promote by using the following best practices:
- Distributing flyers and brochures
- Referral programs by sharing business information to friends and family members
- Making professional business cards as it easy to carry wherever you get-go
- Email marketing to promote services to thousands of potential customers
- Building vital networking to enhance client base and customer service
- Using word-of-mouth technique
- Using social media platforms like LinkedIn, Facebook, and Instagram
Step 5: Create a Responsive Business Website
Once your branding awareness is done, the next essential thing you need to do is develop an effective website for your business.
Nowadays, a website is a powerful tool that helps customers view detailed information about every service you offer.
Also, the life of many small business owners has become smoother and more effective.
Now let us see the primary reasons for building a business website:
- You can easily manage all your business operations with ease, regardless of business size or industry you are into.
- You have more chances to deal with lead generation techniques using websites.
- The customers can easily see the ratings and reviews of the services you offer.
- You can also make marketing efforts by including social media accounts like Facebook pages or LinkedIn profiles.
- You can use GoDaddy Website Builder to create an essential website simply.
- You can also post a newsletter sharing additional information about the services.
Step 6: Get to Know Construction Industry Regulations
As we know, a construction company is equitably balanced. However, the company needs to learn multiple federal, state, and regional rules and regulations before starting a business.
Business owners or contractors must have basic knowledge about the business. In simple words, they must have an idea of business tips like handling multiple resources, the industry’s ins and outs, latest trends, and changes.
Remember that you must have essential business insurance, business licenses, and permits to make a limited liability company on the bottom line.
Step 7: Define Your Pricing Structure
Now, it’s high time to price your services. This is one of the most challenging tasks for both business owners and a contractor.
Remember that your services’ pricing should satisfy the customers, and even it should not include overhead pricing plans.
When planning to set the pricing model, you need to consider factors like rent contract, insurance, materials, labor, marketing, and any other recurring, outgoing payments for the running projects.
Step 8: Ask for Reviews
The last step that a contractor or business owners need to consider is considering the reviews that your clients leave for your business.
Nowadays, people who want to take your services, first they approach to see business reviews. So, it becomes mandatory for you to generate reviews as quickly as possible.
As you receive more positive feedback for your construction projects that you are handling, there are more chances of getting new customers.
You just need to make sure that your clients are delighted with the services before leaving the site. Also, you can send them a text message or email to take regular follow-up by informing them to leave a review of the projects undertaken.
These are the main steps that can help you start your general contracting business with ease and make your business be on top of your competitors’ rest.
Still, do you have any questions related to contracting business? Don’t worry. We have highlighted some of the frequently asked questions in the next section to clear all your doubts.
- Visit Potential Clients
- Title Page Method
- Hire an Estimating Company
- Audition Method
- Interview Method
- Exposure Method
- Always Demonstrate Expertise
- Commercial and Residential Lead Generation Services
- Add the Government as a Client
Starting a general contracting business is one of the unique ways to help you deal with construction knowledge and essential management skills.
By following the steps mentioned in this article, you can quickly improve your skills and move your company towards colossal success. In short, you must have an appropriate business plan, a team of reliable contractors and subcontractors, and essential legal papers.
When it comes to managing our contracting business digitally using software, FieldCamp is one of the best software that allows you to track all the contractors with their current location, work, and more.
With FieldCamp, it becomes easy for you to manage your business with just a few clicks. Not only this, there are many other benefits of using field service management software.