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How to Start a General Contractor Business

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So, you want to start a general contractor business. Don’t just dive in head first. If you want to build a sustainable business that is set up for growth and long-term success, it’s important to take the time to plan and consider everything.

This article will break down the steps for creating and executing a general contractor business plan without making costly mistakes. Keep reading to learn more.



How to Start a General Contractor Business in 9 Steps

Here’s a list of nine steps that will get your business started on a solid foundation for success.


1. Weigh the Pros and Cons of Starting a Business

First, it’s important to consider the pros and cons of having a general contractor business. General contractors hold an immense amount of legal and financial responsibility for their workers as well as their clients. In order to succeed, you’ll need to possess a wealth of skills and have a team of hard-working professionals under you.

Some of the pros of running your own company include more freedom to set hours and choose projects, but you’ll need to be sure you have the qualities necessary to responsibly manage clients, employees, and projects on a much larger scale than you may be used to.


2. Draft a Business Plan

Creating a business plan is one of the first steps toward becoming a successful business owner. You should be especially thorough if you need to apply for loans from investors and institutions, as they will want to see that you have considered every minor detail.

Here are some of the details you need to include in a general contractor business plan:

  • Your plan and structure for management
  • A description of your mission and strategy
  • A detailed list of the services you will provide
  • Your target market
  • Your current status, including employees and projects
  • A budget, including startup costs and projected earnings

3. Get Licensed, Bonded, and Insured

This step is necessary for your protection, as well as that of your clients and employees. Each state has unique requirements for licenses, so be sure to research general contractor business licenses and insurance near you to include these costs in your business plan.

First, determine the classification of your general contracting services , then determine the type of licensing required by your state. Depending on the state, you’ll likely have to take an exam, prove financial responsibility, and prove experience. The licensing body could also require reference letters.

In addition to licenses, all general contractor businesses need bonds and/or insurance to begin operations. These exist to protect you, your customers, and other business partners.


4. Choose a Business Name

If this step sounds simple, it mostly is. The important thing is to ensure your business name is straightforward, as in, your client will know exactly what you provide by reading your business name.

It’s also important to ensure your business name is available, for legal reasons. You can use Google or an internet database of business names. It’s not necessary to trademark a name, but if someone has been using the name in a commerce market before you, they have a legal right to the name.


5. Incorporate Your Business

When choosing which legal entity is best for your business, it’s important to explore all the options .

The five types of entities are as follows:

  • Limited Liability Company (LLC)
  • Corporation
  • Non-profit
  • S Corporation
  • Sole proprietorship

You can choose between these options for your general contractor business depending on your size and business plan.


6. Open a Business Bank Account

When you open a business bank account, you are able to protect your assets, accept payment under your business name, pay your employees under your business name, and build your credit.

Speak to an agent at your bank of choice to discuss the options available for your business. Options may vary depending on your personal credit history and the type of business you are endeavoring to start.


7. Hire Subcontractors

As your business grows, you’ll want to develop strong professional relationships with subcontractors who specialize in aspects of your business that you wish to delegate. These could be areas where you lack strength or to complete tasks that you don’t have time to complete.

You can choose to go the route of hiring employees, in which case you will be responsible for their taxes and other legal formalities. Otherwise, you can select independent contractors, who operate as separate business entities and will send you an invoice for the work they perform for you.


8. Develop and Define Your Brand

Branding is a crucial part of developing any business. It’s a step that begins when you draft your business plan and design your logo, but it should evolve as your business establishes itself. When you begin interacting with customers, you’ll have a better idea of how you should be presenting yourself.


9. Establish Your Online Presence

As you develop your brand, you can begin to grow your online presence. Begin with a website. If at all possible, pay a professional to design one for you. It could be the first impression you make on potential clients, so be sure that impression is a good one.

Once you have a website, consider which social media accounts would benefit you most. You should explore the platforms of your most successful competitors and try to model your online presence after theirs.

3D render of a kitchen designed with Cedreo
Farmhouse designed with Cedreo

How to Market a General Contractor Business

Marketing your general contractor business is very important, as construction is quite a competitive industry. When you’re working on developing your online presence, start with these steps .

1. Define your ideal customer: Create personas of your ideal customers. This way, when you’re writing and creating content for your website and social media, you’ll have a specific voice that is catered to the exact client you want to speak to.

2. Create a visual website: Hire a professional for this. And be sure to include all essential information, social proof such as reviews, and a few portfolio pieces.

3. Set up your GMB profile: Your Google Business Profile will help local customers find you in Google results.

4. Create a profile on customer review sites: Locate the review sites where your competitors are, then set up a branded account with these sites so you can start building social proof.

5. Run a review campaign: The power of social proof cannot be overstated. Your clients will be more likely to trust you if they see real people in their neighborhood who are happy with your services.



Other Ways to Market Your General Contractor Business Online

Here are a few more great strategies for building your online presence.

  • Use hoarding signage
  • Join major industry associations
  • Launch Google local service ads
  • Re-engage past customers
  • List your business on lead gen sites
  • Incentivize referrals
  • Sponsor local events and teams
  • Leverage video marketing campaigns
  • Feature your employees
  • Build strategic local partnerships
  • Showcase your work on social media
  • Promote free quotes
  • Use 3D home design software to sell the vision
  • Use blog content to answer buyer questions
  • Set up conversion tracking



General Contractor Business Mistakes to Avoid

Now that you know what to do, here’s what not to do when starting a general contractor business.


1. Neglecting Safety Measures

The risks posed by accidents at construction sites are massive. They can cause physical injuries, property damage, and a serious risk to public safety. Remember, you are financially and legally responsible for what happens at your job site. Never neglect safety.


2. Hiring or Assigning the Wrong Workers

Getting to know your team’s strengths will pay dividends when it comes to work assignments. If you value your employees and make their jobs as easy as possible, they will produce better work for you.

You can start by hiring workers that you see great potential in and assigning them to jobs where you’re confident they’ll thrive.


3. Improperly Estimating Costs and Poorly Planning Projects

This is one of the quickest ways to ruin an otherwise well-done project. Either you won’t land the contract you wanted because you overestimated, or you’ll be stuck choosing between your client and your wallet if you underestimate.

Project estimates and planning are essential skills for a general contractor business owner, so be sure to take them very seriously.


4. Relying on Outdated Software

With modern technology, there are tons of innovative ways for general contractors to expedite processes and improve productivity.

You may be hesitant to pay subscription fees or upfront costs, but choosing a great construction management platform, HR software, or 3D design software can save you time and money in the long run.


5. Not Modernizing Manual Processes

Modern software also allows you to automate a lot of time-consuming manual tasks, which can take a huge burden off of you or your employees. Again, while there may be upfront costs or subscription fees, these costs will be much lower than the cost of the time spent performing the tasks manually.


6. Ignoring Proper Equipment Management

Equipment is an expensive investment that all general contractors make in order to best serve their clients. So not performing the proper management and maintenance can be a costly and dangerous mistake.

Be sure to follow all procedures and repair damaged equipment as promptly as possible. Keep a use and maintenance log to monitor the health of your equipment and prevent costly repairs.


7. Not Effectively Scaling Growth

In construction, things can happen rapidly. Sometimes, the feast and famine cycle of owning a business causes general contractors to bite off more than they can chew when it comes to scaling their business.

In general, it's best to always err on the side of caution with construction projects. Overworking yourself and your employees can lead to costly mistakes and legal issues in the case of an accident. Quality over quantity is a great mantra for beginner general contractor business owners.


8. Ignoring Change Management

As technology changes, your business should evolve alongside it. Take the time to sit down and plan for change management every year in order to adapt and embrace everything that new innovations have to offer.


9. Avoiding scheduling issues

Project management is a key skill for general contractors who employ sub-trades or employees. Take the time to address incomplete schedules and miscommunications to avoid project failure or costly and preventable delays.


10. Relying on an ineffective accounting system

Getting an accountant or great accounting software is the ideal solution for financial management, especially if you don’t have much experience in financial management. There are many options to choose from, so one is bound to suit the needs of your business perfectly.


11. Not using home building software to grow your business

No, you don’t need to hire expensive designers, architects, and floorplan drafting professionals to deliver drawings and mock-ups. With the right software, you can draft project-ready floor plans and view changes as you make them in real-time 3D.

Cedreo is the best choice for design software, as it combines the precision of professional layout and architecture software with the aesthetic capabilities of designing and decorating software.

In just a few minutes, you can have precise project drafts for your team and stunning photorealistic 3D renderings of your project to wow your clients and win the contract.



Conclusion

There are many steps to starting a general contractor business, but if you’ve read this article, you’ve got all of the basics you need to press go.

Want a powerful tool to set you up for success? Cedreo can help with your next residential project: start using the free version today.

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