Starting up any company is tricky, but starting a contracting business is a little more complex than beginning as a freelance Internet consultant, for instance. In this guide, we’ll go over the major steps you need to keep in mind, so you know how to start a contracting business without issues.
Figuring Out Your Contracting Business Strategy
The term “contractor” is pretty broad and can encompass lots of services or products. It’s always important to figure out exactly what you’ll be offering as a contracting business and what your overall strategy will be. Maybe you offer handyman services or carpet cleaning? Or maybe you’re focused on construction or landscaping? Determine the market you’ll be working in most closely and what kind of contracting business you want to build. Doing all this is necessary before you move on to the next steps because it will impact all the things you need, like financing, equipment, and employees.
In addition, make sure that you want to start your own contracting business and understand all the work that will come along with it. This is a big decision, and it’s not one you should take lightly.
Financing Your Contracting Business
Financing, as mentioned, is critically important. You should determine how much capital you’ll likely need for all your business expenses, including rental space, equipment and machinery, employee salaries, insurance costs, and more. It’s a good idea to consider the long term and figure out your finances, particularly because you can determine how much money you can play with before making a business plan. Don’t let your dreams go too high before you have an understanding of your monetary funds.
Contracting Business Planning
Once you do figure out financing (like determining where you’ll get loans or start-up cash from), it’s time to formulate a business plan. If you can leave your full-time job and begin your contracting business right away, good for you! But you might also need to have a business plan that involves a slow transition to self-employment.
Furthermore, you should come up with metrics or checkpoints for your business’ growth. Having an end goal or at least a moment where you can call the business “off the ground” is crucial for your morale and planning purposes.
You’ll also want to come up with a detailed business plan so you can determine what markets you’ll best perform in and to decide how you’ll be marketing your products and services to your customers. No one starts a successful contracting business without getting all these details down first.
Naming And Applying for Licenses For Your Contracting Business
After drawing up a business plan and figuring out your financing, you can finally start to home in on the details.
The name of your contracting business is incredibly important. It’s what your customers will remember you by and what new clients might search for. As such, your name needs to be unique and memorable, as well as declare exactly what kind of business you are offering. Keeping the name simple and to the point, but catchy or snappy, is a good rule of thumb.
EIN (Employer Identification Number)
If your contracting business will be set up as an LLC or corporation, or if you have any employees whatsoever, you’ll need an EIN. This will allow you to open business bank accounts, apply for employers’ licenses, and file appropriate tax returns. You can apply for an EIN here.
You may additionally need a vendor’s license from your state government. It might not be necessary if you’re in one of the states that don’t require this license for your contracting business. Research your state requirements to determine whether you need this.
Don’t Forget A Business Bank Account!
It’s a good idea to separate your business and personal expenses as firmly as possible. Getting a business bank account will also open up additional loan opportunities and help you maintain a better credit score. Thankfully, opening a business bank account is very easy and can be done within 15 minutes at a local bank branch. You’ll get things like a debit card and a booklet of checks with your business’s name on them, as well.
Insurance Is Important In Contracting Businesses
Any contracting business worth its salt will have insurance. The fact of the matter is that many customers will turn you away if you don’t have insurance, which protects you and your customer from accidents or poor employee performance. Get insurance instead of risking the high expenses that can come with catastrophic accidents.
You should also look at the coverage that matters for what you provide. Some insurance covers employees, others cover services, and others cover vehicles and equipment. Worker’s compensation coverage or unemployment compensation tax are two more things to consider, and more items to think about when you are figuring out your finances.
Employees And Equipment
Once you got your business named and set up, you can finally begin hiring employees and purchasing equipment. Don’t just think of equipment you’ll use for your actual contracting services; you may also need office or administrative equipment like computers or billing and accounting software. If you don’t already have a good truck or van, you’ll need to get one so you can get to your job sites.
Furthermore, you should spend plenty of time and money finding good employees who are qualified and who won’t waste your time. It’s much costlier, in the long run, to pick up poor employees with lots of turnover than it is to spend a little longer finding someone just right for your contracting business.
When it comes to contracting companies, figuring out your payment can be tricky. You’ll most likely need multiple payment options when you are first starting out so you can take on as many clients as possible. You should also try to find secure payment options and come up with policies that you apply to all your clients. For instance, asking for a deposit at the beginning of the project can somewhat insulate you from bad clients refusing to pay.
Promotional Work And Marketing
Don’t discount the value and necessity of effective promotional work and marketing. No one will know that your contracting business is a thing unless you go out there and tell them about! One simple way to market your business is to have its brand or logo painted on your vehicle and most of your equipment. You can also spend money on advertising campaigns, make email newsletters, or have your clients try to network and recommend you to their fellows.
Grow Your Contracting Business!
After doing all this, all that’s left to do is grow your business and provide your contracting services. Building up your own contracting business is a difficult and time-consuming venture, but it’s well worth the cost and comes with independence like you’ve never known before. Good luck!