Starting a General Contracting business can be a very exciting adventure especially if you enjoy making repairs to real estate. There are lots of factors many people starting General Contracting companies tend to overlook, and I want to discuss them with you here.
In 2013, after my husband immigrated from Ghana, he had trouble finding work that he enjoyed. He really wanted to start his own business, but we had a small startup budget.
He decided to start a landscaping business using our personal lawnmower, but as he would cut grass, people would ask for additional services. They’d say, “You did a great job on the grass, do you think you can put up a fence for me?”, and he never said “no”.
He would go and do research on how to do what the customer had requested. Once he was confident that he could do it, he would draft a contract stating what he would be doing, how much it would cost, and when was the expected completion. With time, he scaled from doing lawn care into doing full home renovations as a General Contractor.
Now, after five years in the business, it has reached the $20,000 per month mark, and we’ve learned alot from the journey: good things, things to watch out for, and ways to make General Contracting an enjoyable business, and I’d like to share them with you.
The Difference in the Handyman and the True Contractor Entrepreneur
When you’re out in the field as a General Contractor, you’ll see different schools of thought. There are handymen out there. These could be plumbers, electricians, HVAC guys, welders or carpenters. They go from job to job, living paycheck to paycheck, and they’re very bad off when their leads come in slow.
Alternatively, you have the True Contractor Entrepreneur who has his stuff together. He seems to always have leads, he’s able to hire and maintain a crew, and he has a good reputation in the community.
How do these two ends of the spectrum (Handyman and True Contractor Entrepreneur) maintain such a difference in the same industry?
There are quite a few factors I want to share with you, and it’s why I wrote this article so you cannot only know how to start a General Contracting Business, but how to start a General Contracting Business right.
Before you get started on the work required for your business, you want to make sure you have the legal components out of the way. You want to:
- Choose an appropriate business structure
- Incorporate your business
- Get the licenses you need
- Open a business bank account
- Choose a payment processor
- Get your insurance and bond (if it’s needed for the jobs you’ll be doing)
- Acquire the supplies you need: home office supplies and on-site supplies
- Create a schedule and a budget to be clear about how much money and time you can invest
- Create a standard contract (affiliate link to Rocket Lawyer) you’ll use when you get jobs
In addition to the resources hyperlinked above, this video gives a good explanation on the preliminaries:
In addition to the preliminaries, there are five steps you should take to set up your marketing funnel online and drive continual leads to your business. The business won’t last long without sales so the sales processes are going to be key! They are…
Step One: Choose an Interest
(Image Source: Wealthy Affiliate)
This quick story will seem a little off topic for a second, but you’ll understand as I explain…
McDonald’s was not the first restaurant. Rather, restaurants had been around for centuries before they came to the scene. Now, they’re in over 100 countries. They have 35,000 locations, and they’re now known as one of the most successful restaurants, but what did they do differently than other restaurants?
They chose a niche inside of the restaurant industry that wasn’t mastered at their time: fast food. They had very thin profit margins, but they were very particular at managing their costs and maintaining “upsell processes”.
They used the same amount of ketsup for each burger, the same amount of mustard, the same buns, and they were slow to modify their menu. When you buy a burger, they usually ask, “Would you like a fry and a drink with that?”, thus increasing the total sale price and increasing their margin. They mastered the training manual, so they were governed by documents that transcended generations, therefore, the McDonald’s we know today is very similar to the one franchised by Ray Kroc in the 1950’s.
McDonald’s did quite a few things to set themselves apart, and you can apply them to.
How Does McDonald’s Apply To You?
Too often, contractors want to be “yes” men. They don’t hone in on a product or service and focus. Instead, they scale in uncalculated ways, and it makes it very hard for them to secure their profit margins.
They may go from acquiring a plumbing contract into a roofing contract. The two require very different skills and it’s likely, they may have to hire or subcontract often to complete the contracts. When you have to hire often and you have high turnover, you never grow a loyal employee base, and you’re more prone to have liability situations happen (burglary, accidents, or behavioral run-ins).
Contracting requires lots of math like:
- What’s the square footage of the area you’re working on?
- What is the quantity of the materials needed?
- What’s the cost of the materials needed?
- What’s the labor costs of those working for you?
- How many laborers will you need to complete the job on time?
- What’s the condition of the job before you start?
- Does the site need prep work before starting the job?
- and, so many other mathematical questions…
When you hop around within the industry: from flooring to roofing to drywall to electrical, and so on, you sacrifice the security of knowing your profit margins accurately or knowing your people well. When you don’t know your profit margins, it makes the business VERY high risk and probable to fail.
You can grossly underestimate labor, materials, a crew member’s skill level, or some other pertinent factor necessary to completing the job, and close the job without turning a profit. And, guess what?
Your employees will still expect to be paid. Your customer will still expect you to complete the contract as you said, and your family (if you have one at home) will still expect you to put food on the table.
It’s really important that you take to heart the basic principles applied by McDonald’s and decide how your General Contracting Company can specialize in an area of the industry (residential painting, commercial painting, residential electrical, residential carpentry, etc.), then create a way to streamline your pricing strategy where there’s consistency, and predictable margins. There are some great courses over on Udemy on Contractor pricing, estimation, and others that I’d recommend you take a look at.
Step Two: Build a Website
In today’s market, there’s a growing number of people who have a smartphone in their purse or pocket, and use it regularly to decide what companies they’ll become patrons of. In fact, 2.9+ million smartphones were sold today(June 16, 2018), and with new models and features constantly coming out, the sales are sure to continue.
When people want to find a service (like General Contracting), they pull out their phones and speak to Siri or type in “General Contractor near me”. Often times, if you don’t have a website, you miss out on the opportunity to play the game of business. Don’t let this be you.
It’s fairly simple to set up a website. In fact, you can have your website set up in a matter of 30 seconds! This video will show you how…
Now, it’s your turn…
You can create your website using SiteRubix website creator here…
Be on the lookout in your email for your login information. I recommend getting training from Wealthy Affiliate, my #1 recommendation for Internet Marketing training. They’ll show you how to take the website and make money with it in a very comprehensive way.
Here’s a breakdown of what you get at Wealthy Affiliate…
Step Three: Attract Visitors
Now is the moment of truth. You are standing up the lead generation system of your General Contracting business. This is another MAJOR gamechanger between the handyman and the True Entrepreneur Contractor (we talked about earlier).
The entrepreneur knows there are more systems that need to be in place in addition to the client fulfillment system where you’re doing the tactical tasks of your profession. In addition to the tactical tasks, you should stand up 7 business systems for optimal performance of your business. The 7 systems include:
- The Lead Generation System
- The Lead Conversion System
- The Client Fulfillment System
- The Job Prototypes
- The Leadership System
- The Management System
- The Branding System
If you need more information on the 7 systems, check out my article HERE. If you’d like a basic blueprint for standing your General Contracting Business up, then check out this Business Blueprint for HERE.
How Does Your Website Fit Into the 7 Business Systems?
Your website can be a major component of your lead generation system. When your website is up and it ranks in Google, it can drive massive leads to your business. The people who are typing in “General Contractor near me” can be directed to your website using organic methods or paid methods that are all taught when you CREATE YOUR FREE ACCOUNT at Wealthy Affiliate.
Added onto your website, Wealthy Affiliate will teach you how to set up the entire digital marketing trifecta (earned media, owned media, and paid media) that marketing companies all over the internet swear by. It looks like this…
(Image Source: Titan Growth)
Step Four: Earn Revenue
Mathematically speaking, the more traffic you have to your business, the more leads you’ll have. The more leads you have, the more sales you’ll have, then you’re onto a fabulous start!
When the lead generation, lead conversion, and client fulfillment systems are stable or growing (like what would be the case if you follow this process), then you’ll have a viable business. You won’t be an average “Handyman”. You’ll be a “True Entrepreneur Contractor”.
Many of the stories you hear of other people in your industry can be avoided once you have your systems set up well, and the SKY IS THE LIMIT WITH EARNING POTENTIAL! You can even start off or advance past what my husband and I have achieved.
Final Words on How To Start a General Contracting Business
The goal of this article was to show you how to start a general contracting business. This may seem like alot if you’re just getting started, and it may be a little overwhelming. If you have questions or concerns about this, don’t hesitate to leave them in the comments section. I’d love to help you out!
If you’re interested in starting or growing your general contracting business, check out my free e-course! It’s a framework to grow a business: from idea to full-time income, and from full-time income to enterprise. Along with the free e-course, you’ll get my invitation for 7 days of free coaching at Wealthy Affiliate. If this sounds interesting to you, get started here.
Now, it’s Your Turn…
Have you considered starting a General Contracting Company? What’s holding you back? Have you started a General Contracting company already? What would you tell an entrepreneur just starting out? Leave your comments, questions, and concerns below.