How to Start a Remodeling Business

Homeowners periodically like to update their spaces to “keep up with the Joneses”, and they pay significant prices to do so. The U.S. remodeling industry is worth over a massive $110 billion and has grown by over 50% in the last decade. Remodeling skills are clearly very valuable and starting your own remodeling business can put those skills to work and help you to cash in on a piece of that multi-billion-dollar market. 

It sounds easy but starting a remodeling business takes more than a hammer and nails. Hard work and business expertise will be your keys to success, and luckily this step-by-step guide has all the advice and insight to give you that expertise. The rest of the hard work is up to you!

Step 1: Decide if the Business Is Right for You

Pros and cons

Starting a remodeling business has pros and cons to consider before deciding if it’s the right path for you.

Remodeling industry trends

Industry size and growth

• Industry size – The US remodeling industry is worth a staggering $112 billion in 2022.((https://www.ibisworld.com/industry-statistics/market-size/remodeling-united-states/))
• Growth forecast – The US remodeling industry has grown by over 50% in the last 10 years. Growth is projected to continue in 2022 as people continue to spend disposable income to make home improvements.
• Number of Businesses – There are 493,728 remodeling businesses in the US as of 2022.((https://www.ibisworld.com/industry-statistics/number-of-businesses/remodeling-united-states/))
• Number of People Employed – There are 7.4 million people employed in the construction sector as a whole.((https://www.statista.com/statistics/187412/number-of-employees-in-us-construction/))

Trends and challenges

Some of the latest trends in home remodeling include:

• Millennials are entering the market, turning from do-it-yourself projects to professionals. One reason for this is that they are seeing pictures of projects on social media and are inspired to replicate them in their own homes, but lack the skills to do so.
• Wellness design is increasing in popularity, which includes installing things like installing steam ovens, spas, zen gardens, and touchless toilets. 

Challenges also exist in the industry, which include:

• Supply chain issues are increasing the customer’s time waiting for materials causing delays for remodelers.
• Television shows and the abundance of DIY YouTube videos is making DIY the biggest competitor for remodelers. 

Who works in remodeling?

• Gender – 74.6% of people who work in remodeling are men.((https://www.zippia.com/home-improvement-contractor-jobs/demographics/))
• Average age – The average age of a remodeler is 46.8 years.
• Average level of education – 33% of remodeling workers have a bachelor’s degree, 28% have a high school diploma, 19% have an associate’s degree, 10% have a diploma, and 10% have another degree.

How much does it cost to start a remodeling business?

Startup costs for a remodeling business range from $2,500 to $7,000. The main costs are for a website setup and tools. If you already have tools, your costs will be less. If you don’t have a vehicle to transport your tools and other materials, you’ll need to add in that cost. 

You’ll need a handful of items to successfully launch your remodeling business, including: 

• Ladders
• Hammers, screwdrivers, wrenches, other hand tools
• Tile saw 
• Jigsaw
• Power drill
• Miter saw
• Hammer drill
• Air nailers
• Compressor

How much can you earn from a remodeling business?

Bathrooms and kitchens are the most common remodeling jobs. The average bathroom costs about $10,000 and the average kitchen remodel costs $25,000. When you’re just starting out, your jobs will probably fall into the $10,000 range. Working with one laborer, your profit margin should be about 80%.

In your first year or two, you could run your business from home and do 12 jobs in a year, bringing in $120,000 in annual revenue. This would mean $96,000 in profit, assuming that 80% margin. As your brand gains recognition, sales could climb to 20 jobs a year that are at a higher price point of $15,000. At this stage, you would hire additional labor, reducing your profit margin to around 40%. With expected annual revenue of $300,000, you would make about $120,000.

What barriers to entry are there?

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

• Having the right skills or hiring skilled labor.
• Facing competition from established remodeling companies and big hardware stores like Home Depot.

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Step 2: Hone Your Idea

Now that you know what’s involved in starting a remodeling 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 remodeling businesses 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 remodeler who specializes in tile.

You might consider targeting a niche market by specializing in a certain aspect of your industry such as kitchen remodels.

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

What? Determine your products or services

Your services will depend on your skills or the labor that you can find. Your remodeling may involve:

• Cabinet installation
• Flooring installation
• Painting
• Fixture and appliance installation
• Plumbing
• Electrical work
• Wall tile installation

How much should you charge for remodeling services?

All of your prices should be broken down into all the tasks that are involved in the job. For example, for tile flooring, you’ll charge by the square foot. The average price for tile floor installation ranges from $14 – $21 per square foot. Your customer will typically pay for all materials. HomeWyse is a good resource for labor prices. Once you have a full crew you should aim for a profit margin of about 40%.

Once you know your costs, you can use this Step By Step profit margin calculator to determine your mark-up and final price point. Remember, the price you use at launch should be subject to change if warranted by the market.

Who? Identify your target market

Your target market will be homeowners who are typically a more established group. You can find them on Facebook or LinkedIn. You can also, however, partner with realtors to get referrals, and LinkedIn is a great place to connect with them.

Where? Choose your business premises

In the early stages, you may want to run your business from home to keep costs low, and you’ll probably continue to do business this way. If you ever decide that you need an office, you can find commercial space to rent in your area on sites such as Craigslist, Crexi, and Instant Offices.

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 Remodeling Business Name

Your business name is your business identity, so choose one that encapsulates your objectives, services, and mission in just a few words. You probably want a name that’s short and easy to remember, since much of your business, and your initial business in particular, will come from word-of-mouth referrals.

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 
• Name should be relevant to your product or service offerings
• Ask around — family, friends, colleagues, social media — for suggestions
• Including keywords, such as “remodeler” or “remodeling”, boosts SEO
• Name should allow for expansion, for ex: “Redesign Construction” over “Kitchen and Bath Innovations”
• Avoid location-based names that might hinder future expansion
• Use online tools like the Step by Step Business Name Generator. Just type in a few keywords and hit “generate” and you’ll have dozens of suggestions at your fingertips.

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. 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 sets 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 Remodeling Business Plan

Every business needs a plan. This will function as a guidebook to take your startup through the launch process and maintain focus on your key goals. A business plan also enables potential partners and investors to better understand your company and its vision:

• Executive Summary: Outline the overarching goals of your remodeling business, the services you will provide, and your approach to delivering high-quality renovations.
• Business Overview: Describe the type of remodeling projects your business will undertake, such as residential homes or commercial spaces.
• Product and Services: List the specific remodeling services you offer, including kitchen renovations, bathroom upgrades, or whole-house remodels.
• Market Analysis: Assess the demand for remodeling services in your target area and the types of clients you will serve.
• Competitive Analysis: Identify other remodeling businesses in your market and describe how your services, craftsmanship, or pricing will stand out.
• Sales and Marketing: Detail how you plan to attract and retain customers, through advertising, showcasing completed projects, or customer referrals.
• Management Team: Highlight the expertise and roles of the individuals who will manage the business and oversee project execution.
• Operations Plan: Outline the process for engaging with clients, from initial consultation to project completion and follow-up.
• Financial Plan: Provide a summary of the financial aspects, such as cost estimates, pricing strategy, and projected cash flow.
• Appendix: Include supplementary documents like sample contracts, before-and-after photos of past projects, or detailed market research that supports your business strategy.

If you’ve never created a business plan, it can be an intimidating task. You might consider finding and 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’re planning to expand, you might consider looking elsewhere, as some states could offer real advantages when it comes to remodeling businesses.

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 remodeling 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.
• 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 need 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 an 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 be on hand to answer any questions you might have. 

Form Your LLC

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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.

The IRS website also offers a tax-payers checklist, and taxes can be filed online.

It is important to consult an accountant or other professional to help you with your taxes to ensure you’re 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 loans or SBA loans are probably the best options for funding a remodeling business, or you can just use personal funds since the startup costs are low.

Step 8: Apply for Remodeling Business Licenses and Permits

Starting a remodeling business requires obtaining a number of licenses and permits from local, state, and federal governments. Depending on the type of work that you do and your state’s requirements you may need a contractor’s license. Check with your state to find out what is required.

Federal regulations, licenses, and permits associated with starting your business include doing business as, health license and permit 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 licenses 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 remodeling 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, workflow, 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 services like WordPress, Wix, or Squarespace. 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:

1. Localized SEO Optimization: Optimize your online presence for local searches by incorporating location-specific keywords in your content, meta descriptions, and Google My Business profile to attract customers in your immediate area.
2. Leverage Social Media Testimonials: Encourage satisfied clients to share their remodeling success stories on social media platforms. Visual testimonials, before-and-after pictures, and positive comments can build trust and credibility.
3. Interactive Content for Engagement: Develop interactive content like quizzes, polls, or interactive infographics on social media to engage your audience. This not only attracts attention but also positions you as an industry expert.
4. Collaborate with Local Influencers: Identify and partner with local influencers or bloggers in the home improvement niche. Their endorsement can introduce your remodeling business to a wider audience and generate leads.
5. DIY Workshops and Seminars: Host free or low-cost DIY remodeling workshops in your community. This not only showcases your expertise but also establishes a connection with potential clients who may need professional assistance.
6. Strategic Partnerships with Realtors: Forge partnerships with local real estate agents. They often encounter clients looking to renovate homes before selling or after purchasing, making them a valuable source of referrals.
7. Referral Programs for Previous Clients: Implement a referral program where satisfied clients receive incentives for recommending your services. Word-of-mouth referrals can be incredibly powerful in the remodeling industry.
8. Mobile-Friendly Advertising: Optimize your advertising for mobile devices, as many homeowners search for remodeling services on their smartphones. Ensure that your website and advertisements are mobile-friendly for a seamless user experience.
9. Google Ads for Targeted Visibility: Invest in Google Ads to increase your online visibility. Target specific keywords related to remodeling services in your area to capture potential customers actively searching for these services.
10. Community Involvement and Sponsorships: Sponsor local community events or sports teams to enhance your business’s visibility. Active participation in community activities helps build a positive reputation and fosters a sense of trust among potential clients.

Focus on USPs

Unique selling propositions, or USPs, are the characteristics of a product or service that sets 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 remodeling 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 remodeling business could be:

• Master tiling at affordable prices
• Luxury remodeling services for any room
• Top quality custom kitchens and baths

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 remodeling business, or a LinkedIn contact of yours is connected to dozens of potential clients. Maybe your cousin or neighbor has been working in remodeling 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 remodeling. You’ll probably generate new customers or find companies with which you could establish a partnership.

Step 12: Build Your Team

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

• Laborers – assist with tear out, other tasks
• Plumber – plumbing portions of jobs 
• Electrical – light fixture installation, rewiring
• General Manager – scheduling, staff management, accounting, 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: Run a Remodeling Business – Start Making Money!

Who knew that remodeling was such a huge industry?  Over $110 billion is an astounding number, and you can make good money by getting just a small chunk of it with your remodeling business. You can run your business from home and get started with little out-of-pocket cash. 

All you need are tool skills and a willingness to get your hands dirty, you can build a lucrative company. Now that you’re a business expert, strap on that tool belt and get to work on launching your new remodeling business!