How to Start a Contracting Company and Find Success
A 2018 survey established that the general contracting industry is primed for growth. The vast majority of contractors expect sales volume to increase.
If you’re looking to become a contractor, now is the best time to break into the industry. However, just because the industry is thriving doesn’t mean your business will be successful. Competition for clients is rife, meaning only the savviest contractors get the contracts.
Keen to learn what it takes to succeed?
Here’s how to start a contracting company that’ll win contracts and rake in the profits.
Understand How the Industry Works
As a savvy entrepreneur, the first step to establish any business is to get a good handle on how that industry works. This is especially important if you haven’t held a job in the industry.
As a general contractor, your job would be to secure contracts and provide specific services. For example, you could secure a public cleaning contract, which means your company will be responsible for providing cleaning services to your city’s public facilities.
Or if you have a professional background in building and construction, you could win a contract to supply building materials.
As you can tell, you can opt to become a general contractor or set up a company that focuses on a specific niche. Which way to go?
Both options have their upsides and downsides.
As a general contractor, your company will be open to any kind of contracting job. But this means the company must have the resources and expertise to take on varied jobs.
On the other hand, specialist contractors can only work on specific jobs. But this limits your ability to attract many clients.
Identify a Good Location
Although home-based businesses are on the rise, a contracting company isn’t the kind of business you can run out of your home. You need to be in a location where it’s easy to find clients or get business.
Take your time to do market research and identify a location where contracting businesses are thriving.
It’s also important to consider the competition before settling on a location. If you base your company in a location that has a high number of other contracting service providers, you might struggle to shake off their dominance in the market and find clients.
Choose a Legal Structure and Register the Company
With the location locked in, the next step is to register the company.
But before you do, you have a decision to make: the company’s legal structure.
Although you might be tempted to set up a sole proprietorship because of the ease of registration, it’s advisable to register a limited liability company, and here is why.
Contracting jobs come with a lot of risks. For instance, a worksite can be deemed an environmental hazard if you don’t take the right protection measures. As a result, your company can be sued in a court of law.
When your company is an LLC, your personal liability is limited. If the company is fined or spirals into debt, you won’t be held personally responsible for those debts. But as a sole proprietorship, your personal assets will be on the line.
Secure Funding
Contracting is a capital-intensive business. You need capital to not only set up an office and purchase the necessary equipment but also to finance the contracts you will win. In most cases, clients will pay you after the job is complete.
To determine how much capital you’ll need, be sure to draw a detailed business plan. If you’ve no experience writing these plans, consider hiring an expert. They’ll do everything from writing an executive summary to determining capital requirements and defining your marketing strategy.
Now that you know how much capital you need, where will you get it?
If you’re self-funding, move on to the next step!
But if you don’t have sufficient capital, there’s work to do. Getting funded is one of the biggest challenges facing entrepreneurs. But with the right strategies, you can get the money you need.
Your first option is to go in for a business loan. If that doesn’t work out or if you don’t secure enough money, try borrowing from friends and family. Partnering up with another person who has an interest in the contracting industry can also be an ideal way to raise funds, as long as you’re splitting the startup costs.
Purchase the Necessary Equipment
Most contracting jobs are hands-on, so you need to purchase or lease the right equipment.
Since equipment will gobble up most of your capital, it’s crucial to be smart with your purchases. Instead of purchasing single-use equipment, it’s more economical to go for multi-use or versatile equipment.
If you’re a cleaning contractor, for example, one versatile equipment you should be looking into is this sweeper. It can handle a wide range of cleaning tasks.
Purchase Adequate Liability Insurance
Along with choosing the right legal structure for your contracting company, purchasing adequate liability insurance is a way to protect your business from liability risks. If somebody is hurt on one of your worksites, this insurance policy will compensate them for their losses.
And as you bring employees on board, you’ll need to purchase workers’ comp insurance, too.
Promote Your Contracting Company
To this end, what’s left is to let your target market know about the new business on the block.
Because you probably don’t have any marketing experience, it’s best to hire a marketing agency and let them put your business on the map. These pros will create a professional website for your company, put you on social media, and implement a content marketing strategy.
Yours is to sit back and wait for potential clients to start calling.
That’s How to Start a Contracting Company and Be Successful
As long as the economy keeps humming on, the demand for contracting services will always be there. Choosing to run a business in this industry is a smart decision that will no doubt pay off.
And now that you know how to start a contracting company, the only thing that stands between you and success is action. Get the ball rolling today!
While at it, keep tabs on our blog for more business insights.
