In 2019, the US construction industry generated $2 trillion in revenue.
If you’ve ever considered starting a contractor business, now is the best time to do it.
However, starting a contractor business can be daunting. There are many things to consider, and the prospect of risk is always looming in the background.
But it doesn’t have to be that way! With this complete guide to starting a contractor business, you’ll have all the information you need at your fingertips.
Table of Contents
Determine the Startup Costs
Starting a construction company is not cheap. You’ll need construction equipment, vehicles, and materials. You’ll also need to pay for permits, licenses, marketing, and insurance.
You should also factor in ongoing costs such as payroll, fuel, and maintenance.
A figure of $100,000 is a reasonable estimate for what you’ll need to get started.
But don’t let the big numbers scare you! The good news is that you can start small and grow your business as you go. And there are a few ways to reduce your startup costs:
- Lease construction equipment instead of buying it outright
- Use recycled or reclaimed materials whenever possible
- Negotiate better prices with suppliers and subcontractors
- Invest in marketing and advertising only when necessary
Create a budget and stick to it once you know how much money you’ll need to get started!
You may also want to consider getting a loan from a bank or other lending institution. It will give you the capital you need to start without depleting your savings account.
Identify the Target Market
When deciding on a construction business target market, it’s essential to remember that you can’t be all things to everyone.
You’ll need to focus your efforts and tailor your services toward one particular demographic or niche group. That will help ensure your success as well as maximize profits.
To determine who you should aim for, ask yourself these questions:
- Who would use the construction company?
- What do they care about most? (Price, quality of materials, etc.)
- Where do they live and work?
- What is their age group?
Once you have a good idea of your target market, it will be easier to create marketing materials that appeal to them specifically.
Remember, construction is a big industry that involves many different types of construction companies and services. You need to narrow your focus and identify what makes your construction company different and better than the rest.
That’s where your unique selling proposition comes in!
What can you offer that other construction companies don’t? How are you going to make money off of this?
These are crucial questions to answer before you start a construction business. It will help guide your decisions regarding setting prices, services, and more.
Determine Your Business Structure
The next step is to decide on the structure of your construction company. It will determine how much responsibility you have and how much liability you face.
There are four primary types of business structures: Sole Proprietorship, Partnership, Corporation, and Limited Liability Company (LLC).
Sole proprietorship and partnership are the most straightforward structures and don’t involve a lot of paperwork or fees. However, both of these options expose you to personal liability if something goes wrong in the business.
A corporation offers more protection from personal liability but is more complex and expensive to set up. An LLC provides the best of both worlds- it’s simple to establish and offers limited liability protection for the owners.
You should seek business advice from an attorney or accountant who can help you decide what’s best for your construction company.
Once you’ve decided on a business structure, you’ll need to file the appropriate paperwork with the state and obtain any necessary licenses or permits.
Select a Name for Your Business
If you’re starting a construction company, the name of your business will be vital. It should reflect what your construction company does and convey trustworthiness to potential customers.
While a construction company name should have something to do with construction, there are no hard rules regarding this. Just make sure that whatever you choose reflects positively on your brand image!
Registering a business name can be done online or at your local county clerk’s office.
Once you’ve come up with a construction company name, make sure it isn’t taken by doing an internet search for your construction business name plus the word “trademark.” If there are no results, then you’re good to go!
You can also check on Trademarkia and The United States Patent and Trademark Office website.
Register for Taxes
You will need to obtain a tax ID number and register for an Employer Identification Number (EIN) before you can open up any construction business accounts.
A tax ID is also known as a Federal Taxpayer Identification Number, which the IRS uses to identify your company’s financial transactions. You’ll need this when filing taxes or starting construction-related bank accounts.
An EIN acts like a social security number for businesses; it isn’t directly related to where you live but rather what type of entity you are (sole proprietor/partnership, corporation, etc.). This process usually only takes about five minutes online.
Open a Business Bank Account
You can’t run a construction business without having a bank account. You’ll need this to pay employees, purchase construction supplies, and more.
To open a construction company checking/savings account, you will probably need:
- Business Documentation
- Federal Tax ID Number (EIN) or Social Security Number
- A location address for your business
- Driver’s License or Passport
Once you have all of this, you can head down to your nearest bank and apply for a construction business account.
Invest in a Cost Estimator Tool
Relying solely on your gut when it comes to pricing can be risky. A CostCertified cost estimator tool is the best way to accurately estimate project costs and maintain a competitive advantage incontractor businessthe marketplace.
Not only will this help you make more accurate bids, but it’ll also streamline project management by allowing team members to collaborate directly from their mobile devices while they’re working at job sites!
Click here to see CostCertified features.
Starting a Contractor Business – The Basics
Now that you have the basic steps down, you’re ready to start your contractor business. Remember that every state has different laws and regulations, so it’s essential to do your research before starting a business.
Good luck as you begin your contractor journey! For the best startup tips, keep checking out our blog.