If you’ve been looking for a business opportunity that you can start with little or no money, a contracting business could be worthwhile.
This type of business is easy to start once you’re skilled and equipped with the correct information and equipment.
Like other businesses, you would risk your time and money if you start a contracting business without understanding the basics.
The truth is, it’s easy to start a contracting business. But the question is, where do you start? Worry not!
This article explains the basics of how to start a contracting business and how to manage it in the long run. You will learn what steps to take and what liabilities to protect yourself from.
Is Contracting Business Right For You?
The first question to ask yourself before venturing into any business is whether it is right for you. The same applies to a contracting company.
Becoming a contractor gives you independence and flexibility in self-employment. You set your own hours and work according to your set goals.
Having a contracting business can also expose you to countless opportunities that you wouldn’t otherwise encounter.
However, it’s essential to understand how contracting business works before deciding.
Contracting companies are responsible for their business and team success and the success of any project.
Not being equipped with the right skills and equipment will make you liable for several damages.
Thus, having the ability to finance, manage, and organize materials, team members, and clients is key for your overall business success.
Day-to-Day Activities for a Contracting Business
Before starting a contracting business, it’s essential to know the nature of the day-to-day activities of a construction company.
The core day-to-day activity of a construction company is to build a client’s residential or commercial structure.
The following are some of the major day-to-day activities and materials of a construction company:
- Following a project blueprints and plans
- Ordering and buying construction materials
- Creating punch lists
- Work inspection
- Subcontractors hiring (electrical, plumbing, painting)
- Future project inquiry
Skills and Experiences for a Successful Contracting Business
Like other businesses, contracting business requires certain skills and experience to succeed. The following are the major skills and experience for a successful contracting business:
- Background in construction
- Following project plans
- Understanding blueprints
- Understanding the fundamentals of projects
- Good communication skills
- Apprentice experience
- Experience with small business finance
- Employee management skills
Having the above skills and experience will help you build and manage a successful contracting business in the long run.
Are you good to go? Great, let’s now to the major part of this article: how to start a contracting business.
Steps on How to Start a Contracting Business
Starting a contracting business is an exciting undertaking. You have the freedom to work when you want, where you want and for who you want.
However, it also requires serious planning. Here are quick, straightforward steps to help you know exactly how to start your own contracting business:
1. Plan Your Business
One of the key early steps in starting your own contracting business is to create your business plan. Business startup plans are formal documents that help establish a business.
The start-up plan should include the business idea, management team, financial needs, marketing plan and much more.
Writing a business plan is not hard. In fact, it can be a pleasant, almost fun task. You only have to invest a few hours of your time.
Business planning is critical to becoming an entrepreneur, so don’t shortchange it.
Plus, the time you spend on the business plan will provide you with the necessary information for starting a new business.
2. Form a Legal Entity
To start a contracting business quickly and easily, you’ll need to form a legal entity. The most common business entity for contractors is a limited liability company (LLC).
Form a legal business entity to protect your assets by becoming an LLC. LLC protects business owners from being held personally liable if they are sued.
Each province has different requirements for forming an LLC, but all will require registering the business with the appropriate agency and obtaining a province ID number.
With the proper legal protection, you can also start your own contracting business and work with others.
You can also be self-employed without worrying about being held personally liable for business obligations.
3. Register for Taxes
Starting a contracting business is serious, so you will need to fully understand various provinces and federal tax requirements before beginning your project.
Therefore, register for taxes before opening your business to ensure compliance with pertinent tax laws and regulations.
You can begin this process with a province tax identification number. You can apply online or via the mail.
Once you have registered with a province tax identification number, you can register for a federal tax identification number, also known as an Employer Tax Identification Number (EIN).
4. Open a Business Bank Account
Opening a business bank account is the next step in getting your contracting business off the ground.
Your business needs its own bank account, both to separate your life from your company and for tax purposes.
You want your business bank account to be as protected from your personal assets (liabilities) as possible. Otherwise, you can quickly lose everything.
For example, if you get sued and don’t have some kind of protection, the plaintiff will know how much you have in the bank at any given moment.
Protect your personal assets and credit score. Before you get started, set up business accounts by setting up a business checking account and a credit card in the business name.
5. Set up Business Accounting
Setting up business accounting while maintaining a small business is not an easy task, but it’s necessary if you want to succeed.
When you are working with others, keeping accurate records becomes more vital.
Accurate records make it possible to bill customers, pay bills and file income tax reports correctly.
To set up simple business accounting, start by recording expenses and income in a notebook or computer spreadsheet.
6. Obtain Necessary Permits and Licenses
Starting a business can be tricky, but one of the best things you can do to ensure success is to acquire all of the necessary permits and licenses.
Whether you are starting your own business or helping someone else, knowing the permits and licenses needed for a successful business is key.
You might have to pay heavy fines or lose your business if you do not acquire the necessary permits and licenses.
Therefore, if you wish to start a contracting business, you must have a general contractor’s license and the appropriate licenses and permits required.
7. Get Business Insurance
Protect your company’s financial wellbeing in the event of a covered loss by securing your business insurance coverage.
Business Insurance helps protect your business against financial loss. There are many creative ways to run a business, but you can’t work without protection.
To get started, you should understand the difference between business insurance policies and which types are suitable for your company.
Without business insurance, there is no way to protect your business against claims related to accidents that occur using your goods and services.
8. Define Your Brand
As a small business owner, you’ll want to stand out from other businesses, which is why it’s essential to define what your company stands for.
This can be accomplished by clearly understanding your company’s mission statement and core values.
Defining your brand helps when creating your marketing message and points of differentiation between your business and others in the market.
Therefore, whether you’re starting a new business or looking to rebrand an existing venture, it’s important to make sure that you have a recognizable image for your company.
9. Create Your Business Website
Creating a website is an alternative that first-time entrepreneurs often overlook.
A website is a front door to your business, so before jumping into the nitty-gritty of your first service, it’s important to have a web presence.
So how do you go about creating your own site from scratch? Several resources online have the facilities to help you build websites on various platforms.
Start creating a website for your business by using website hosting sites like WIX and WordPress.
10. Set up Your Business Phone System
One of the things you’ll probably need for your business is a phone line.
Having a phone system separate from your personal cell or home phone will save you time and money.
Some people get their home phone and computer hooked up through the same network, which is fine.
However, if you’re running a business from home, other people will likely be using the line for personal reasons as well.
That can make it hard to keep track of all of your calls since some businesses are pretty busy.
By having a business phone number, you can keep your personal calls separate and never worry about giving out your main cell phone number to potential customers.
6 Tips on How to Manage a Contracting Business
Now you know how to start a contracting business, it’s essential to understand how to run.
Creating a contracting business is only one step to succeeding in this endeavour. How you manage your contracting business determines your overall long-term success.
Here are six practical tips to consider after creating a contracting business.
1. Comply With the Industry’s Best Practices
Sticking to your jurisdiction’s rules is key to your long-term business success. Bridging regulations will not only damage your business reputation but cost you money and resources.
Adhering to the industry’s best practices will improve your brand loyalty and build public trust, which will attract more projects to you.
To this end, ensure you have good bookkeeping, task management, invoicing and other necessary tools to keep your business in good standing.
2. Provide Good Customer Service
How you treat your customers will determine your customer return rate and lead generation. Providing good customer service is one of the major secrets of most successful contracting companies.
Consider the following factors when providing good customer service to your customers:
- Have an active phone number and email
- Respond quickly to your customers
- Stick to your business hours
3. Be Unique
There are many contracting companies out there. Being unique is what distinguishes you from others.
Understanding how your competitors operate is the first time of being unique. Consider your competitors’ cost, nature, specialization, and overall marketing strategies when making your business unique.
Whether you specialize in the commercial, residential or niche market, ensure you have outstanding features that make your business unique.
4. Be on Top of Your Marketing Game
To succeed in this industry, you must have a competing marketing strategy. This entails a broader understanding of the market and consistent restrategizing.
It’s easy to have outstanding online and offline campaigns to attract more clients to your business. Having a business website and social media platforms will help you easily showcase your brands to your target audience.
You can also use the Internet for marketing your business to your local market. All you need to do is set up Google My Business with your business address, phone number, and availability.
Besides that, marketing your business in local newspapers, television and commerce meetings will help you stay on top of your game.
5. Be Flexible
Most successful contracting companies are flexible in their service rendering. Being flexible means meeting your clients’ needs even beyond your range of services.
For insurance, fixing a client’s leaking pipe while doing electrical work means you’re flexible and reliable. It saves your client from the costs of hiring a plumber. This makes you a cost-saving contractor.
As a result, it’s essential to take professional courses and training related to your contracting business.
6. Keep an Eye on Your Finances
The cost of starting a contracting business is only a fraction of the cost of managing. Not managing your business finance well means your business is not in good standing.
Ensure you keep an eye on all your business expenses regarding any project. Good bookkeeping, task management, invoicing and other necessary tools will ease your finance management.
To this end, you should factor in all the material and labour costs before giving out a quote or estimate to any client.
The construction business is one of the attractive businesses to consider if you have the skills and resources.
As construction projects continue to increase, construction companies are in high demand. Taking advantage of this position could be your take to attaining financial freedom.
If you doubted how to start a contracting business before, now your doubts are cleared. Like other businesses, it’s essential to understand the basics of contracting business to minimize risk and maximize profits in the long run.
Hopefully, you’re now equipped with the knowledge you need to start your contracting business and manage it in the long run.
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FAQs on How to Start a Contracting Business
How much does it cost to start a contracting business?
The average cost of starting a contracting business is between $15,000 to $20,000. However, the actual cost depends on the size of your business and location.
Do contractors make good money?
Of course. Contractors with solid marketing strategies make good money from contracting businesses. In fact, some contractors earn more than full-time employees. How much you earn depends on your marketing strategies, relationship, skills and quality service.
How do contractors get paid?
Contractors are paid by each signed contract through credit cards, wire transfers, cheques, payroll software, etc. Each contract has a timeframe based on a given project.
Do you need a degree to start a construction company?
You don’t need a degree to start a construction company. However, you need to build your skills with professional courses to excel.