Today, it’s become a bit challenging to start a business because of the uncertainties brought by the COVID-19 pandemic. This also applies to general contracting businesses. However, this shouldn’t deter you from starting a general contracting business, especially if you are enthusiastic about construction.
With that, you should understand that the to-do list before starting a general contracting business is quite extensive. Moreover, you need to get everything right if you want your business to succeed.
General contracting is quite a lucrative business, one that’s worth pursuing. A general contractor earns an average salary of $95,000. Besides, projections show an 8% growth rate within the next 10 years, and this is 4% higher than any other occupation.
So, to help you get started, we shall highlight the key steps to starting a general contracting business. Let’s delve in!
Start with mentorship and training
Most people who run general contracting businesses started by getting direct mentorship and training from already established general contractors. Mentorships, apprenticeships, and formal training are activities that you can pursue when planning to build a successful general contracting business.
Capitalizing on the expertise and knowledge of other people comes with numerous benefits. First, you get to understand whether starting such a business is the right thing for you. Besides, you have the opportunity to learn from seasoned general contractors.
Determine the services you’d like to offer
This is another essential step for anyone planning to start a general contracting business. To determine the services that you want to offer, you need to evaluate your skills in this manner:
Doing so will make work easier for you. Perhaps you are experienced in commercial construction and you’ve never worked on residential projects to take one immediately after starting your business. Or, you have expertise on different general contracting projects, but you don’t know the one to focus on.
Narrowing down the kind of services you like working on will ensure that you deliver good results once you start your business. Good results lead to satisfied clients, referrals, positive reviews, and returning clients—all these are essential for the success of your business. Also, note the services that have high demand in your area—and see whether you can deliver them too.
Define your business model
The next step is to define your business model. Here, you will need to create a comprehensive business plan and make sure that you choose a business model. Make sure that you get a name for your business. Then, check with the relevant authorities whether the name is available.
Typically, there are four primary options to select from when defining a business model. These include:
- Sole proprietorship
- Limited liability company (LLC)
Please note that each of these options has different legal responsibilities, and most of them revolve around the owner’s liability of assets and debts. Ensure that you outline your business model on the business plan. Besides, your business plan should have clear details on how you plan to run your business, generate revenue, as well mitigate risks.
Most general contracting businesses start as sole proprietorships. However, you will need to find a business model that gives you the right balance of financial and legal benefits, and security too.
Know the ins and outs of the industry regulations
According to the experts from the general contracting company, AFS General Contracting, the general contracting industry is fairly regulated, with numerous regional, state, and federal regulations. And, you will need to familiarize yourself with these rules when starting a general contracting business. Also, you will need to stay updated with the ins and outs of the industry, as well as any new changes and trends. However, you must note that this is a time-consuming, but necessary part of running such a business.
Also, please note that some states require general contractors to acquire specific permits and licenses. So, starting your general contracting business without such permits can put you into serious legal problems, or increase your risk of fraud. So, it’s important to check with your state the permits and licenses that you need to start your general contracting business.
Secure financing for your new business
The costs of starting a general contracting business can vary depending on the specialty that you choose. However, starting a general contracting business can be a bit costly than starting other types of business. The main reason behind this is that you will regularly need to invest in vehicles, equipment, as well as building materials—and their cost might fluctuate from time to time.
Now, if you cannot purchase the required items out of your pocket, consider consulting your financial institution or lender to see the kind of financing you can secure for your business. Some of the available financing options include credit, equipment loans, as well as invoice financing.
Secure insurance, permits, and bonds
When you start your general contracting business, you will need to follow the industry’s best standards. Now, without the right coverage, your new business risks serious lawsuits or penalties in case of non-compliance.
With that, you will need to acquire the following document before starting your general contracting business:
- Insurance – the available options include worker’s compensation, general liability, as well as insurance policies to protect your equipment.
- Permits – the permits required for your business depend on your location. Therefore, consult with your local authorities to find out the permits that you need.
- Bonds – if in any case, you cannot complete any project, surety bonds will act as protection.