If you’re looking to start your own construction contracting company and don’t know where to start, we’ve rounded up some of the most common questions to help you get started. For further assistance, see the links at the end of the article.
Is starting a construction company a good idea?
No one can decide if starting a construction company is a good idea for you except yourself. Look at the pros and cons below to help you make your decision:Pros
- Construction is almost always in demand, and the pool of potential customers is large.
- You can provide specialized services that reduce the number of competitors and can make you the go-to contractor.
- You can start small, with only yourself, and hire more workers as your business picks up.
- Starting a construction contracting business can be a lot of work and will cost you more than starting other types of businesses.
- With many companies competing against each other for work, profit margins are low.
- There is substantial risk in performing and managing the work.
What licenses are needed to start a construction business?
Many cities and almost all states require construction contractors to register or be licensed to perform work. Some states require all contractors to have a license, while others only require contractors providing certain services to register. Cities often require contractors to purchase business licenses before doing work in their town.
The requirements for licensing or business registration are different in each state. You will usually be required to purchase business general liability insurance, and workers compensation insurance if you have employees. Some states may require that you take educational classes or pass a test to prove your expertise in the work you’ll be performing. Look on the internet for your state’s construction contractor licensing or registration department website for detailed information on the process and whether you need to be licensed or registered.
What do I need to start a construction company?
Depending on the type of work you’ll be providing, you may be able to start your business with only a vehicle and some tools. You’ll need some cash to get started to pay for licensing, insurance, and marketing. The cash will have to hold you until you get your first job. Then you can ask your customer for a deposit to fund material purchases and permits if required.
Successful business owners have done their research about the market and have put together a solid business plan. You don’t have to plan for every contingency, but you should know how you’re going to market your business, fund it, and when you’ll hire additional workers.
Of course, experience is another great asset to have. It tells your potential customers that you have the skills necessary to complete the work. Create a portfolio of projects that you’ve completed, even if it was while working somewhere else. Take before and after photos to showcase the value of your work.
How to register a construction company
There are several things you’ll need to do to register your company and make it legal. The specifics will vary according to the state you’re working in and what type of work you’ll be performing, but the general process is the same.
- Choose a name for your company, if desired. You can also work under your own name.
- If you choose to work under a company name, you’ll need to register with the Secretary of State or business registration office.
- Decide on your business’ structure: sole proprietorship, S corporation, C corporation, limited liability company (LLC), or a partnership. Consult with an attorney or CPA if you aren’t sure which one is best.
- Apply for a federal tax ID number through the IRS website. You’ll use this number when opening a bank account and hiring employees.
- Open a separate bank account for your business and decide how you will track your income and expenses.
- If your state requires your company to be licensed in order to provide construction services, you’ll need to complete that application process and provide the required information and insurance.
How to start a commercial construction company
Once you’ve completed the registration process, if required, and have your initial financing in place, it’s time to start marketing your company. Subcontractors will want to connect with general contractors who are looking for their particular trade or scope of work. A great place to start is with a bid site like PlanHub. General contractors can search for the subcontractors they need and invite them to bid on their projects. And subcontractors can reach out to general contractors through the site and introduce themselves and their services.
General contractors will want to network with other business owners in their area to find out when they may need their services. This can be done through traditional advertising, social media marketing, or in-person events. Getting involved in the local community is a great way to build connections and win customers.
How to start a residential construction company
After registering your company, if necessary, and securing initial financing, you can start marketing your business to homeowners and other residential contractors. These days everyone looks to the internet when looking for contractors, so having a web presence is important. Set up a simple website and take advantage of social media to start spreading the word about your company and its services. Photos and videos of completed projects are a great way to showcase your work. You don’t need any special equipment, just use your smartphone or tablet. Share it with your friends and family and ask them to “like” or comment on your post for more traction.
How to start a construction company with no money
There are several options when it comes to financing your new company:
- Use your savings or retirement funds
- Use a credit card to finance your purchases
- Request a business loan from a bank or other financial institution
- Request a loan from a friend or family member
For more information on becoming a contractor, see our other articles: