Starting a Contracting Business

Written by: BUSINESS

Things To Consider Before Starting a Contracting Business

Although the construction industry offers lucrative opportunities and some great money, starting your own contracting business is risky. In fact, around 90 percent of contracting companies close shop within 10 years. That being said, deciding to venture into the contracting sector requires careful thought and serious preparation.

Like any other business, starting a contracting company requires more than just construction experience and technical skills, but also business, management, and administrative skills. Contracting companies face a myriad of risks – financial, legal, labor shortages, productivity issues, subcontractor default, and health and safety hazards. And navigating through these risks is vital to ensure success.

If done right, a contracting business can be very profitable. But where and how do you start? Here we discuss some important things to consider before starting your construction business.

Business Plan

First of all, you need to devise a business plan. This is an essential document that will guide you as you build your business. Think of it as a blueprint of your contracting company that contains the specific details of the business such as the mission and vision, financial analysis, sales and marketing plan, services and rates, etc.

The business plan serves as the foundation for your company, so you want to make sure that it has been carefully studied and foolproof. Always remember: Failing to plan is planning to fail.


State Regulations

Can you legally manage a contracting company? Do you need to get licensed? How can you register your business? Know more about the regulations in your state related to starting a business, particularly in the construction sector.

Each jurisdiction has unique guidelines, standards, and laws that can affect how you run your contracting company. You need to be aware of them to avoid legal issues in the future. Some important things to check include business registration and licensing, tax filing requirements, building code, state-specific requirements for contractors, etc. It’s important to know the legal stuff beforehand to avoid delays when beginning.


To legally operate as a contracting business, you need to be licensed or registered in your state or city. Some states require licensing for both the contractor and the business. Licensure is often a lengthy process that entails meeting stringent educational and documentary requirements and passing an examination. Others simply require registration of the company in its business regulations authority.

Office Location

A physical location for your office is important so potential clients will know where to find you. Having a well-designed office also adds to your credibility as a construction company. Some contractors start their business right at the comfort of their homes. You can also do this provided that your city allows and that you have enough space. The office should be conducive enough for your team and clients. It should have enough workspace for each team member, office equipment, work tools, and a boardroom for conducting a meeting.

Funding Resources

As you start your business, you need to have access to financial resources. According to the veteran general contracting company, AFS General Contracting, the working capital a business needs will depend on the type and size of projects you wish to take. Aside from your money, there are many ways you can raise funds. There are numerous banking and financial institutions where you can lend. You can also find suppliers that offer a good line of credit. Your startup capital is important to ensure projects run smoothly.


Considering the risks associated with construction projects, contractors need the proper coverage before starting a contracting business. Typically, general liability insurance will cover for damage or injury due to projects. Consider taking surety bonds to protect your clients in case of errors during the construction.

Tools and equipment

You’ll need several tools and equipment for your future projects. Take an inventory of the equipment you already own as well as those you need to buy. Aside from building equipment, you’ll also need office equipment like computers, printers, CAD software, project management tools, etc. Likewise, you might need to invest in transport vehicles such as a truck or van. Being fully equipped shows that your contracting company is ready to take on projects.

Qualified Staff

A contracting business is composed of a team of skilled workers and builders. Make sure you have a pool of reliable professionals for future projects. When hiring workers, you want to get qualified and experienced individuals as this can impact the quality of work. Check their credentials and do due diligence, otherwise, you might end up with a poor project outcome.


Promoting your business and reaching your target audience is essential. Landing your first project is probably one of the toughest parts of starting a contracting company. You need to have a good marketing plan that will showcase your services, portfolio, rates, and client testimonials. Maximize available marketing channels, but particularly on the internet or on social media. Make sure your prospects can easily get in touch with you.

Last modified: September 14, 2021