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Did you know that 24% of construction startups don’t make it past the first year due to financial issues and disorganized practices?
But there’s good news. Through proper planning and finding the right partners (like site plan providers), you can prevent most of these pitfalls—and we’re here to help. Check the key steps and tips on how to start a contracting business below.
The Groundwork: Basic Steps on How to Start a Contracting Business
Here are the steps you absolutely can’t afford to skip:
Step 1. Define business goals and services.
Do you want to be a general contractor or a specialized expert?
As a general contractor, you can manage multiple trades and diverse projects, but specializing lets you focus on one area and charge premium rates.
When choosing a type, consider your skill set, personal interest, and market demand. Ask yourself: What problems do you want to solve(services)? And who do you want to serve (target market)?
Step 2. Choose the right business structure.
Think of the business structure as the frame of the building. It supports and shapes the entire venture—from operations to taxes.
Small business owners and independent contractors enjoy the ease of setup of sole proprietorship and Limited Liability Companies (LLC) while a corporation’s legal protection suits larger startups.
But don’t just go with the simplest option—consider how each structure impacts taxes, personal liability, and your business goals. (See this detailed guide on business structures).
Step 3. Set up funding and maintain cash flow.
You’d need around $50,000 to $500,000 to get the business up and running, and there are plenty of ways to get these funds—credit cards, business loans, investors, and crowdfunding.
Once secured, keep your cash flow steady by establishing clear payment terms with clients and managing inventory properly. Open banking accounts to track incoming and outgoing funds, so you can spot financial issues early on.
Step 4. Get licensed and insured.
The Hultgren Construction filed bankruptcy after an accident killed one of their workers—a classic example of why you need to get licensed and insured.
Licensing and certifications show your commitment to craft, establishing you as an authority in your field while insurance is your safety net from financial disasters. Requirements vary per state, so always check local regulations.
The Foundation: Building Strategic Partnerships
The groundwork’s done. It’s time to build the pillars of your business success through contractor partnerships. Forming a strategic alliance delivers competitive advantages to scale the business more efficiently—lower operating costs, entry to new markets, and better workflow.
Partnership agreements (PA) promote long-term growth and joint ventures (JV) allow you to take bigger short-term projects, and subcontracting agreements and supplier partnerships give access to specialized services and quality materials without extra investment.
Contracting with a partnership boosts your business reach, and a site plan partner is one you shouldn’t miss. Here’s why…
The Importance of a Site Plan Partner
A site plan is your project’s roadmap, so partnering with a reliable site plan provider is a construction startup’s trump card.
With an expert partner, you’ll get clear and detailed site plans to guide the entire project—from design to compliance. This partnership will help you save time, avoid costly delays, and keep your project on track without additional payroll.
To find the right strategic partner, seek referrals from colleagues and professional contracting associations, attend trade shows, and check online platforms
Prioritize providers with a proven track record of delivering high-quality plans on time and within budget. Check their portfolio and reviews to ensure that their values and expertise align with your business goals and services.
Create a Successful Contracting Business with MySitePlan
MySitePlan is the #1 provider of non-certified site plans—an affordable and fast alternative for projects where certification isn’t required.
With over 65,000 successful projects, we deliver detailed and compliant site plan drawings that get your project off to a strong start.
Leave the nitty-gritty of site plans to us, so you can focus on what you do best. Reach out to know more about our site plan packages or explore other services.
How to Start a Contracting Business FAQs
How do independent contractors get clients?
Get clients through partnership, networking, and word-of-mouth advertisement. Joining contracting platforms and social media marketing also widens your reach.
How do I price myself as an independent contractor?
Use this formula: Labor costs + material costs + overhead expenses + contingencies + profit margin. To set reasonable revenue, consider market rates and your experience and expertise.
What are the typical startup costs for a contracting business?
Startup costs include licenses and permits, insurance, equipment, and lease. Also consider ongoing costs,—salaries, advertising fees, rent and utilities.
