Two men in white hard hats shake hands. Behind them is a city skyline with a bright yellow crane working on one of the buildings.
A contracting business could be your road to success, but there are certain requirements you have to meet before you get started. — Getty Images/Phawat Topaisan

Construction contracting can be a lucrative profession. ​​Indeed estimates that the average salary for a general contractor in the United States is more than $80,000 annually. And as your contracting business grows big enough to take on larger projects, that number could increase by a great deal.

Every contractor starts somewhere. Here are a few tips for getting your contracting business off the ground and building something sustainable — pun not intended.

Understand the licensing requirements

General contractors need specific skills to make sure what they create is built safely and to code. For this reason, states and local governments require general contractors to be licensed.

State and local licensing requirements vary widely, but most states want to see proof of industry experience and passing results from trade, business or law exams. Many license applications also ask you to take a test to show that you are well-versed in your trade’s best practices, codes and industry regulations. You may also be asked to present proof of your financial records, show your net worth or provide evidence of general liability insurance.

[Read more: How to Start a Business on a Budget]

Check this list of state-by-state general contractor licensing requirements to learn more about getting licensed to start a contracting business in your area.

Set up and register your business structure

Unlike procuring a contracting license, registering your business is relatively straightforward. Registering your business with the state simply means you’re listed in the state registry and with the federal government. As part of this process, you’ll need to select a business structure.

[Read more: How to Register Your New Business]

Many small business owners choose to start as a sole proprietor, LLC or corporation. There are tax implications for each of these structures that you should explore before you register. Note that it is possible to change your business structure in the future if you so choose.

When you first start out, having other general contractors with whom you can work can be a big help.

Explore business insurance

Business insurance is recommended for virtually all small businesses, but especially so for general contractors. “Whether you accidentally scrape a customer’s hardwood floor, your client trips on a toolbox, or one of your subcontractors makes a costly mistake, you can have the peace of mind that comes with knowing you’re protected,” wrote Next.

General liability insurance is strongly recommended for general contracting businesses. You may also want to consider workers’ compensation insurance or a business owner’s policy (BOP) that bundles insurance coverage for a wide array of situations.

Market your business locally

Marketing can look a little different for general contractors. Your business is built on trust: Customers need to trust that you have the expertise and integrity to get the job done on time, on budget and with high attention to quality and detail. As a result, contractors benefit from word-of-mouth marketing more so than many other businesses.

“Start by making sure that your address, phone number and hours are available online and easily searchable,” wrote Entrepreneur. “After that, network in your community both online and offline by attending chamber of commerce meetings or answering questions in a local newspaper forum.”

Ask for referrals and reviews each time you finish a job. Tapping into sites like Angi (formerly Angie’s List) and Houzz can help build your network and improve your reputation, making it easier to find new customers.

Join an industry association

When you first start out, having other general contractors with whom you can work can be a big help. Join industry associations and trade groups to meet other general contractors.

“Industry associations, such as the Associated General Contractors, aren’t just great for networking. They can also help you develop essential business skills, ranging from how much to charge for clients to how to write a contract,” wrote Entrepreneur.

Not only can they offer mentoring and industry-specific advice, but they may be able to send business leads your way. If you don’t have enough experience to get a license as a contractor, you may be able to work under someone else’s license as a subcontractor. This arrangement can help you learn the ropes while growing your business simultaneously.

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Published March 22, 2022