How to Start a General Contracting Business in 13 Steps

Pay attention to these important factors as you establish your general contracting business:

1. Choose a niche or specialization — Specializing in areas such as green building, historical restoration, luxury home construction, or commercial renovations allows you to target specific customer segments and develop deep expertise in those areas.
2. Get certifications — Certifications such as a general contractor’s license, OSHA safety certification, and specific trade certifications (e.g., electrical, plumbing) demonstrate your qualifications and commitment to professional excellence.
3. Licenses and permits — Get the necessary contractor’s license required by your state or local government. This typically involves passing an exam and meeting experience requirements. Ensure you have all the necessary permits for the specific types of construction work you will be doing.
4. Partnerships — Build a network of reliable subcontractors (e.g., electricians, plumbers, carpenters) to handle specialized tasks. Ensure they are licensed and insured.
5. Equipment — Invest in high-quality tools and equipment necessary for your projects. This may include trucks, trailers, power tools, and safety gear. Establish relationships with reliable suppliers to ensure a steady supply of quality materials.
6. Register your business — A limited liability company (LLC) is the best legal structure for new businesses because it is fast and simple. Form your business immediately using ZenBusiness LLC formation service or choose one of the top services available.
7. Legal business aspects — Register for taxes, open a business bank account, and get an EIN.

Step 1: Decide if the Business Is Right for You

Pros and cons

A general contracting business has pros and cons that you need to weigh before you decide if it’s the right path for you.

General contracting industry trends

Remodeling and home improvement projects are on the rise. The US remodeling industry has expanded by more than half over the past decade. Home improvement spending, which includes contracting as well as DIY spending, totaled $457 billion in 2020 and is expected to reach $510 billion by 2024, according to research firm Statista. This suggests that the main competition of contractors is homeowners who decide to do the job themselves.((https://www.statista.com/topics/1732/home-improvement/#dossierKeyfigures))

Kitchen, bathroom, and basement remodels are the most prevalent jobs, although, since the start of the pandemic, home office remodeling has spiked, according to a Google Trends analysis.((https://www.rocketmortgage.com/learn/renovation-and-remodeling)) This is likely to continue as remote and hybrid work environments become the norm. One study by remote working site Upwork found that nearly one in four Americans will be working remotely by 2025.((https://www.businesswire.com/news/home/20201215005287/en/Upwork-Study-Finds-22-of-American-Workforce-Will-Be-Remote-by-2025))

Industry size and growth

• Industry size and past growth – Market analyst IBISWorld values the US remodeling industry at more than $131 billion, after growing more than 4% annually over the past five years.((https://www.ibisworld.com/industry-statistics/market-size/remodeling-united-states/))  
• Growth forecast – Demand for construction managers is expected to grow 11% from 2020 to 2030, according to the Bureau of Labor Statistics.((https://www.bls.gov/ooh/management/construction-managers.htm)). 
• Number of businesses – There are more than 36,000 general contractors in the US.((https://www.zippia.com/general-contractor-jobs/demographics/)) 

Trends and challenges

General contracting trends include:

• Remote and hybrid work arrangements drive demand for general contracting work
• Green renovations are in demand, including large projects like solar panels, and smaller changes like insulation or HVAC updates
• Eco-friendly materials are also trending, such as paper-based or recycled glass countertops, and bamboo plywood

Challenges in general contracting include:

• Competition from other contractors and homeowners who undertake DIY home improvement projects
• High cost of construction materials might dampen demand

Consumer spending

• Average consumer spend – US homeowners spent an average of $7,560 on home improvement in 2018.((https://www.statista.com/statistics/809304/average-annual-home-improvement-spend-us/))
• Potential customer base – There are around 90 million owner-occupied housing units in the US as of 2020.((https://www.census.gov/quickfacts/fact/table/US/VET605220))

What kind of people work in general contracting?

• Gender – 91% of general contractors in the US are male, while 9% are female.((https://www.zippia.com/general-contractor-jobs/demographics/#gender-statisticsg))
• Average level of education – 45% of general contractors hold a bachelor’s degree.((https://www.zippia.com/general-contractor-jobs/demographics/#degree-level-types))
• Average age – The average age of a general contractor is 46 years old.((https://www.zippia.com/general-contractor-jobs/demographics/#age-statistics))

How much does it cost to start a general contracting business?

Startup costs for a general contracting business range from $6,500 to $20,000. One of the main costs is tools and equipment such as saws, drills, and ladders. The other large expense could be a down payment on a vehicle to transport materials, though often contractors require customers to provide all materials themselves. Generally, suppliers will deliver materials, such as cabinets and tiling, directly to the customers, reducing the contractor’s need for a vehicle.

You’ll need a handful of items to successfully launch your general contracting business. Here’s a list to get you started:

• Hammers, screwdrivers, wrenches, etc.
• Saws, drills, ladders, etc.

Startup Costs	Ballpark Range	Average
Setting up a business name and corporation	$150 - $200	$175
Licenses and permits	$100 - $300	$200
Insurance	$100 - $300	$200
Business cards and brochures	$200 - $300	$250
Website setup	$1,000 - $3,000	$2,000
Tools and equipment	$2,000 - $5,000	$3,500
Down payment on a vehicle to transport materials	$3,000 - $10,000	$6,500
Total	$6,550 - $19,100	$12,825

How much can you earn from a general contracting business?

When you first start, you can work by yourself, and with a single laborer for bigger jobs, and have a profit margin of 80%. The average cost of a bathroom remodel is $10,000 and the average cost of a kitchen remodel is about $20,000, putting the average remodel at $15,000.

In your first year or two, you could work from home and remodel 12 rooms in a year, bringing in $180,000 in annual revenue. This would mean $144,000 in profit, assuming that 80% margin. As your brand gains recognition, sales could climb to 25 rooms a year. At this stage, you’d rent out an office and hire staff, reducing your margin to around 50%. With expected annual revenue of $375,000, you would make close to $190,000.

What barriers to entry are there?

There are a few barriers to entry for a general contracting business. Your biggest challenges will be:

• Skills – You’ll need remodeling skills and experience
• Competition – General contractors are plentiful so you’ll need to stand out

Step 2: Hone Your Idea

Now that you know what’s involved in starting a general contracting business, it’s a good idea to hone your concept in preparation to enter a competitive market.

Market research will give you the upper hand, even if you’re already positive that you have a perfect product or service. Conducting market research is important, because it can help you understand your customers better, who your competitors are, and your business landscape.

Why? Identify an opportunity

Research general contractors in your area to examine their services, price points, and customer reviews. You’re looking for a market gap to fill. For instance, maybe the local market is missing a general contractor that specializes in tile flooring or turning dingy basements into cozy man caves.

This could jumpstart your word-of-mouth marketing and attract clients right away.

What? Determine your services

You need a list of services that you can offer your customers based on your skills or subcontractors that you can hire. These might include:

• Custom cabinets
• Tile floors, backsplashes, showers
• Hardwood flooring
• Countertop installation
• Painting
• Plumbing
• Electrical work
• General handyman services

How much should you charge for general contracting services?

Jobs will be priced according to the services and costs involved. Some estimates would be:

• Cabinet installation – $300 – $500 per cabinet
• Tile flooring – $13 – $21 per square foot
• Tile backsplash – $25 – $30 per square foot
• Wall painting – $4 – $8 per square foot

Your customers will pay for materials, so your costs will be for hired labor, tools, and your transportation to and from the job. Once you know your costs, you can use this Step By Step profit margin calculator to determine your mark-up and final price points. Remember, the prices you use at launch should be subject to change if warranted by the market.

Who? Identify your target market

Your target market is going to be more established people that own homes. The best places to reach those people will be Facebook and particularly LinkedIn. For a contractor, being on LinkedIn will establish your credibility as a professional. You could connect with local realtors to get referrals.

Where? Choose your business premises

In the early stages, you may want to run your business from home to keep costs low. But as your business grows, you’ll likely need to hire workers for various roles and may need to rent out an office. You can find commercial space to rent in your area on Craigslist, Crexi, and Commercial Cafe.

When choosing a commercial space, you may want to follow these rules of thumb:

• Central location accessible via public transport
• Ventilated and spacious, with good natural light
• Flexible lease that can be extended as your business grows
• Ready-to-use space with no major renovations or repairs needed

Step 3: Brainstorm a Business Name

Here are some ideas for brainstorming your business name:

• Short, unique, and catchy names tend to stand out
• Names that are easy to say and spell tend to do better
• The name should be relevant to your product or service offerings
• Ask around — family, friends, colleagues, social media — for suggestions
• Including keywords, such as “contracting” or “remodeling”, boosts SEO
• Choose a name that allows for expansion: “Signature Contracting Solutions” over “Outdoor Living Builders” or “Commercial Contracting Solutions”
• A location-based name can help establish a strong connection with your local community and help with the SEO but might hinder future expansion

Once you’ve got a list of potential names, visit the website of the US Patent and Trademark Office to make sure they are available for registration and check the availability of related domain names using our Domain Name Search tool below. Using “.com” or “.org” sharply increases credibility, so it’s best to focus on these. 

Finally, make your choice among the names that pass this screening and go ahead with domain registration and social media account creation. Your business name is one of the key differentiators that set your business apart. Once you pick your company name, and start with the branding, it is hard to change the business name. Therefore, it’s important to carefully consider your choice before you start a business entity.

Step 4: Create a Business Plan

Here are the key components of a business plan:

• Executive Summary: A concise summary highlighting the core aspects of your general contracting business plan, including mission, goals, and key financial projections.
• Business Overview: An introduction to your general contracting business, covering its history, mission, vision, and legal structure.
• Product and Services: Detailed information about the construction services your business offers, emphasizing specialization and unique selling points.
• Market Analysis: A thorough examination of the construction industry, including trends, target market demographics, and potential growth opportunities.
• Competitive Analysis: Evaluation of competitors in the general contracting sector, identifying strengths, weaknesses, and areas for differentiation.
• Sales and Marketing: Strategies for promoting your general contracting services, outlining sales tactics, advertising, and customer acquisition plans.
• Management Team: Profiles of key team members, emphasizing relevant skills and experience in construction and business management.
• Operations Plan: Details on the day-to-day operations of your general contracting business, including project management, logistics, and equipment.
• Financial Plan: A comprehensive overview of your general contracting business’s financial health, including startup costs, revenue projections, and break-even analysis.
• Appendix: Supplementary materials such as resumes, permits, contracts, and additional documentation supporting the information presented in the business plan.

If you’ve never created a business plan, it can be an intimidating task. You might consider hiring a business plan specialist to create a top-notch business plan for you.

Step 5: Register Your Business

Plus, registration is exciting because it makes the entire process official. Once it’s complete, you’ll have your own business!

Choose where to register your company

Your business location is important because it can affect taxes, legal requirements, and revenue. Most people will register their business in the state where they live, but if you are planning to expand, you might consider looking elsewhere, as some states could offer real advantages when it comes to general contracting.

If you’re willing to move, you could really maximize your business! Keep in mind, it’s relatively easy to transfer your business to another state.

Choose your business structure

Business entities come in several varieties, each with its pros and cons. The legal structure you choose for your general contracting business will shape your taxes, personal liability, and business registration requirements, so choose wisely.

Here are the main options:

• Sole Proprietorship – The most common structure for small businesses makes no legal distinction between company and owner. All income goes to the owner, who’s also liable for any debts, losses, or liabilities incurred by the business. The owner pays taxes on business income on his or her personal tax return.
• General Partnership – Similar to a sole proprietorship, but for two or more people. Again, owners keep the profits and are liable for losses. The partners pay taxes on their share of business income on their personal tax returns.
• Limited Liability Company (LLC) – Combines the characteristics of corporations with those of sole proprietorships or partnerships. Again, the owners are not personally liable for debts.
• C Corp – Under this structure, the business is a distinct legal entity and the owner or owners are not personally liable for its debts. Owners take profits through shareholder dividends, rather than directly. The corporation pays taxes, and owners pay taxes on their dividends, which is sometimes referred to as double taxation.
• S Corp – An S-Corporation refers to the tax classification of the business but is not a business entity. An S-Corp can be either a corporation or an LLC, which just needs to elect to be an S-Corp for tax status. In an S-Corp, income is passed through directly to shareholders, who pay taxes on their share of business income on their personal tax returns.

We recommend that new business owners choose LLC as it offers liability protection and pass-through taxation while being simpler to form than a corporation. You can form an LLC in as little as five minutes using an online LLC formation service. They will check that your business name is available before filing, submit your articles of organization, and answer any questions you might have.

Step 6: Register for Taxes

The final step before you’re able to pay taxes is getting an Employer Identification Number, or EIN. You can file for your EIN online or by mail or fax: visit the IRS website to learn more. Keep in mind, if you’ve chosen to be a sole proprietorship you can simply use your social security number as your EIN.

Once you have your EIN, you’ll need to choose your tax year. Financially speaking, your business will operate in a calendar year (January–December) or a fiscal year, a 12-month period that can start in any month. This will determine your tax cycle, while your business structure will determine which taxes you’ll pay.

It is important to consult an accountant or other professional to help you with your taxes to ensure you are completing them correctly.

Step 7: Fund your Business

Securing financing is your next step and there are plenty of ways to raise capital:

• Bank loans: This is the most common method, but getting approved requires a rock-solid business plan and strong credit history.
• SBA-guaranteed loans: The Small Business Administration can act as guarantor, helping gain that elusive bank approval via an SBA-guaranteed loan.
• Government grants: A handful of financial assistance programs help fund entrepreneurs. Visit Grants.gov to learn which might work for you.
• Friends and Family: Reach out to friends and family to provide a business loan or investment in your concept. It’s a good idea to have legal advice when doing so because SEC regulations apply.
• Crowdfunding: Websites like Kickstarter and Indiegogo offer an increasingly popular low-risk option, in which donors fund your vision. Entrepreneurial crowdfunding sites like Fundable and WeFunder enable multiple investors to fund your business.
• Personal: Self-fund your business via your savings or the sale of property or other assets.

Bank and SBA loans are probably the best options, other than friends and family, for funding a general contracting business.

Step 8: Apply for Licenses/Permits

Starting a general contracting business requires obtaining a number of licenses and permits from local, state, and federal governments.

Federal regulations, licenses, and permits associated with starting your business include doing business as (DBA), health licenses and permits from the Occupational Safety and Health Administration (OSHA), trademarks, copyrights, patents, and other intellectual properties, as well as industry-specific licenses and permits. 

You may also need state-level and local county or city-based licenses and permits. The license requirements and how to obtain them vary, so check the websites of your state, city, and county governments or contact the appropriate person to learn more. 

You could also check this SBA guide for your state’s requirements, but we recommend using MyCorporation’s Business License Compliance Package. They will research the exact forms you need for your business and state and provide them to ensure you’re fully compliant.

If you feel overwhelmed by this step or don’t know how to begin, it might be a good idea to hire a professional to help you check all the legal boxes.

Step 9: Open a Business Bank Account

Before you start making money you’ll need a place to keep it, and that requires opening a bank account.

Keeping your business finances separate from your personal account makes it easy to file taxes and track your company’s income, so it’s worth doing even if you’re running your general contracting business as a sole proprietorship. Opening a business bank account is quite simple, and similar to opening a personal one. Most major banks offer accounts tailored for businesses — just inquire at your preferred bank to learn about their rates and features.

Banks vary in terms of offerings, so it’s a good idea to examine your options and select the best plan for you. Once you choose your bank, bring in your EIN (or Social Security Number if you decide on a sole proprietorship), articles of incorporation, and other legal documents and open your new account.

Step 10: Get Business Insurance

Business insurance is an area that often gets overlooked yet it can be vital to your success as an entrepreneur. Insurance protects you from unexpected events that can have a devastating impact on your business.

Here are some types of insurance to consider:

• General liability: The most comprehensive type of insurance, acting as a catch-all for many business elements that require coverage. If you get just one kind of insurance, this is it. It even protects against bodily injury and property damage.
• Business Property: Provides coverage for your equipment and supplies.
• Equipment Breakdown Insurance: Covers the cost of replacing or repairing equipment that has broken due to mechanical issues.
• Worker’s compensation: Provides compensation to employees injured on the job.
• Property: Covers your physical space, whether it is a cart, storefront, or office.
• Commercial auto: Protection for your company-owned vehicle.
• Professional liability: Protects against claims from a client who says they suffered a loss due to an error or omission in your work.
• Business owner’s policy (BOP): This is an insurance plan that acts as an all-in-one insurance policy, a combination of any of the above insurance types.

Step 11: Prepare to Launch

As opening day nears, prepare for launch by reviewing and improving some key elements of your business.

Essential software and tools

Being an entrepreneur often means wearing many hats, from marketing to sales to accounting, which can be overwhelming. Fortunately, many websites and digital tools are available to help simplify many business tasks.

You can use industry-specific software, such as HCSS, PROCORE, or FieldWire, to help manage your projects, costs, billing, and scheduling.

Accounting

• Popular web-based accounting programs for smaller businesses include Quickbooks, Freshbooks, and Xero. 
• If you’re unfamiliar with basic accounting, you may want to hire a professional, especially as you begin. The consequences for filing incorrect tax documents can be harsh, so accuracy is crucial.

Develop your website

Website development is crucial because your site is your online presence and needs to convince prospective clients of your expertise and professionalism.

You can create your own website using website builders. This route is very affordable, but figuring out how to build a website can be time-consuming. If you lack tech-savvy, you can hire a web designer or developer to create a custom website for your business.

They are unlikely to find your website, however, unless you follow Search Engine Optimization (SEO) practices. These are steps that help pages rank higher in the results of top search engines like Google. 

Marketing

Here are some powerful marketing strategies for your future business:

• Professional Branding — Establish a brand identity that conveys reliability, expertise, and professionalism through your logo, business cards, uniforms, and the appearance of your vehicles and equipment.
• Website & SEO — Create a professional website featuring your portfolio, client testimonials, and detailed service descriptions. Utilize SEO techniques to improve visibility for searches related to general contracting and home renovations.
• Social Media Engagement — Use LinkedIn for professional networking and platforms like Instagram and Facebook to showcase projects, share testimonials, and provide construction tips.
• Content Marketing — Maintain a construction blog with articles on home renovation tips, industry trends, and project management. Produce video content that includes project showcases and process explainers.
• Direct Outreach and Partnerships — Network with local architects, real estate agents, and suppliers to forge relationships that can lead to referrals and collaborative opportunities.
• Email Marketing — Send regular newsletters to keep your audience informed about recent projects, company updates, and special offers.
• Experiential Marketing — Host open houses or project tours after completing significant projects to attract potential clients and demonstrate your capabilities.
• Participation in Local Events — Engage in home shows, trade fairs, and business expos to network with potential clients and exhibit your expertise.
• Community Engagement and Collaborations — Participate in community construction projects and collaborate with local businesses for mutual benefits, enhancing local visibility and goodwill.
• Customer Loyalty and Referral Programs — Implement a referral program that rewards clients for new business introductions. Offer follow-up services to reinforce long-term customer relationships.
• Targeted Advertising — Advertise in local media with compelling content like before-and-after project photos to attract local clientele.
• Visibility Through Signage — Ensure your signage is prominent on job sites and that vehicles and equipment are well-branded to serve as mobile advertisements.

Focus on USPs

Unique selling propositions, or USPs, are the characteristics of a product or service that set it apart from the competition. Customers today are inundated with buying options, so you’ll have a real advantage if they are able to quickly grasp how your general contracting business meets their needs or wishes. It’s wise to do all you can to ensure your USPs stand out on your website and in your marketing and promotional materials, stimulating buyer desire.

Global pizza chain Domino’s is renowned for its USP: “Hot pizza in 30 minutes or less, guaranteed.” Signature USPs for your general contracting business could be:

• Master tiling services for bathrooms, kitchens, and more
• Enjoy the outdoors with your brand new wood deck
• The ideal home office for your new work-at-home lifestyle

Networking

You may not like to network or use personal connections for business gain. But your personal and professional networks likely offer considerable untapped business potential. Maybe that Facebook friend you met in college is now running a general contracting business, or a LinkedIn contact of yours is connected to dozens of potential clients. Maybe your cousin or neighbor has been working as a contractor for years and can offer invaluable insight and industry connections. 

The possibilities are endless, so it’s a good idea to review your personal and professional networks and reach out to those with possible links to or interest in construction. You’ll probably generate new customers or find companies with which you could establish a partnership. Online businesses might also consider affiliate marketing as a way to build relationships with potential partners and boost business.

Step 12: Build Your Team

If you’re starting out small from home, you may not need any employees. But as your business grows, you will likely need workers to fill various roles. Potential positions for a general contracting business would include:

• Laborers – Assist with jobs, clean up
• General Manager – Scheduling, staff management, accounting
• Marketing Lead – SEO strategies, social media, other marketing

At some point, you may need to hire all of these positions or simply a few, depending on the size and needs of your business. You might also hire multiple workers for a single role or a single worker for multiple roles, again depending on need.

Free-of-charge methods to recruit employees include posting ads on popular platforms such as LinkedIn, Facebook, or Jobs.com. You might also consider a premium recruitment option, such as advertising on Indeed, Glassdoor, or ZipRecruiter. Further, if you have the resources, you could consider hiring a recruitment agency to help you find talent.

Step 13: Start Making Money!

As a general contractor, it’s to your advantage if you’re a skilled builder and have experience in project management. You could be a master of all trades, or just one. The possibilities are endless, from focusing on woodworking to building entire home additions. The US remodeling industry is worth more than $131 billion and growing fast, so now is a great time to start building your general contracting business.

You’ve got knowledge in your tool belt now, so it’s time to roll up your sleeves. You’re ready to start your entrepreneurial journey and hammer your way to success!

Quick Answers

Is a general contracting business profitable?

A general contracting business can be very profitable. Profit margins are high, especially if you do most of the work yourself. The average kitchen remodel price is about $20,000, so even if you do just five a year, you’re still making a healthy profit.

Do I need an LLC for my general contracting business?

You can choose any kind of business structure for your general contracting business, but an LLC has many benefits including personal liability protection. If your business is ever sued, your personal assets are not at risk.

How can I get customers for my general contracting business?

Eventually, you will get referral business, but to start, you should sign up on LinkedIn and start connecting with people locally. Connect with realtors who may be able to give you referrals, and post pictures of your work.

What is the difference between general contractor and subcontractor?

A general contractor is responsible for overseeing the entire construction project, managing all aspects, coordinating subcontractors, procuring materials, and ensuring compliance with regulations. Subcontractors are specialists hired by the general contractor to perform specific tasks or trades within the project.

What is the difference between construction management and general contracting?

Construction management involves coordinating and managing all aspects of a construction project on behalf of the client, working closely with architects, engineers, and contractors. General contracting encompasses the overall management and execution of the project, including managing subcontractors and ensuring compliance.

Who is the biggest general contractor in the US?

The biggest general contractor in the US can vary depending on factors like revenue and projects. Some of the largest general contractors in the US include Bechtel, Turner Construction, Fluor Corporation, AECOM, and Kiewit Corporation. Rankings can change based on industry factors and specific evaluation criteria.