How to Start a Contracting Company
Contracting companies generally work for general contractors on large and small construction projects. There are many types of contracting companies, including drywall, plumbing, electrical, cement, carpentry and finish carpentry contractors. The general contractor bids the overall job and the contractors bid on portions of the overall project. It takes all of these types of contractors to complete a construction project.
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Instructions
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Develop a business plan for the type of contract work your business will be engaged in. You can offer residential, commercial or both services. Part of any good business plan is consulting a CPA to help you develop your finance and budget plans. Consult with a lawyer to form your business. You can structure your business as a corporation, sole proprietorship or a limited liability company (LLC). The corporate business formation (C-Corp & S-Corp) protects your personal assets from financial risk.
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Obtain an assumed business name with your local government. An assumed business name will cost $10 to $25. Determine if a business license is required for your state, city and county. Since you will be providing work on other people's property, you will need to purchase contractors liability insurance and bonding. This will protect your business from litigation and financial damages up to the limits of your insurance policy. This type of insurance and bonding is called general liability (GL) insurance. If a job is not done satisfactorily, your insurance will pay out on any damages caused by your company.
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Purchase the tools you need. Take inventory of what tools you do not have and purchase them before your first job. The types of tools that you need depend on the type of contracting business you open. A carpentry contractor needs a table saw, miter saw, hammers, tool belts, skill saws, circular saws and more. Plumbing contractors need pipe cutters, welding equipment, shovels, trenching equipment and more. A great place to purchase commercial-quality tools for less is Harbor Freight Tools.
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Most individuals starting a contracting company will have worked in the construction business before opening their own business. Reach out to your peer group and to the general contractors you know. Let them know that you are now contracting and available to accept projects within your area of specialty. Every contact can be important. The contact will either end up as your employee, general contractor or future contact. Word of mouth is the most powerful advertising there is.
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Develop a resource of top-rate industry professionals. Whatever your specialty, you need talented employees. The better quality staff you have, the better your finished product will be. Pay your best workers top dollar. This will keep them working for you.
One of the biggest mistakes a new contractor makes is to bid low to receive the project. However, you should not bid low; you should bid smart. Be patient and wait for the right jobs. This will keep your business open and not in jeopardy from bidding a job below cost.
Develop an advertising campaign that is effective and inexpensive. Press releases are free and most newspapers are happy to run news about new local area businesses.
Develop a website that outlines your services, rates, insurance and bonding, and contact information. Add your company name and a short list of services to the side of your contracting vehicle or vehicles. Advertise at your local Home Depot and all other builders supply stores, lumberyards and hardware store.
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