If the research conducted by IBISWorld is anything to go by, then becoming a general contractor is a lucrative business opportunity. According to the findings from the research, the next five years will see a spike in commercial construction companies. This can be attributed to an increase in demand for efficiency and office space.
For you to successfully set up a general contractor business, you’ll need to have robust business skills, and comprehension of the construction industry in general, accompanied by many years of experience. There are many aspects of the business to consider. If you don’t know where to start, consider the following general contracting business guide.
Equip Yourself With Bits of Knowledge Of Everything
When applying to get your license as a general contractor, the questions asked in the exam touch on different aspects of construction. These could be on roofing, painting, elevators, custom shutters, and others. It’s important to equip yourself with bits of information on all the fields that could potentially be in your exam paper.
Another crucial general contracting business guide tip is to have great people skills. According to McSweeney, having good relationships in the construction business is key to achieving success. Not only does it entail learning how to communicate well and build trust with people, but it also calls for employers to treat their employees well. While you’re the boss when running your business, you have to ensure that the people who rely on the business thrive. If not, you too will not thrive.
Learn Accounting Skills
Accounting is an important aspect of any business. It helps keep track of the cash flow of your business and is useful when you want to gauge the performance of a business.
Becoming a successful general contractor will not happen overnight. Just like with many other businesses, you need to tirelessly put in the work. All the time and effort invested will pay off in the long run.
Steps to Follow When Starting a General Contracting Business
For your general contracting business to be classified among other successful businesses, some steps need to be completed. Below are a few of those that act as a general contracting business guide for your business.
Outline the Services to Be Offered
Some of the basic services offered by general contracting businesses include; consultancy, repairs, renovations, and construction. Whether you specialize in roofing repair, garage door repairs, or home remodeling, defining the services that you offer will help in establishing a target market.
Draft a Business Plan
Among the first few steps to setting up a successful general contracting business is to draft a plan. This comes in handy when sourcing funds for business. For any loan that a general contractor or contracting organization applies for, a business plan is a critical requirement for the loan to be approved.
An effective business plan should clearly show the services offered, state the goals and objectives of the business, forecast financial expectations such as profit margins, define the business structure idea, show the number of employees in the business and give details about the projected costs, such as licenses, maintenance and more.
Get Requisite Licenses and Permits
This is a very crucial step in a general contracting business guide. Failure to have any of the necessary business permits and licenses may result in bad press or a reputation for the company or the contractor. It may also lead to lengthy legal procedures that would cost you more than it would to get the licenses in the first place.
Get Business Insurance and Open a Bank Account for the Business
Whether your general contracting business is small or large scale, you’ll need a business account to keep track of your business expenses and income rather than if you opted to use your personal account instead. Ensuring the business and its employees are insured is another key step in our general contracting business guide. Insurance companies offer a variety of policies, and you get to choose what policy to take depending on the nature of your business. For example, in a general contracting business, the business may take up property insurance or unemployment insurance to cushion the employees.
Choose a Brand Name and Register It
In business, your brand name is everything. A business name can make a consumer choose one product or service and leave the other, even if the latter is superior and cheaper than the former. Therefore, coming up with a unique business name and registering it is important for your contractor business. It prevents other local and international businesses from using the same business name as you.
Market the Business
For your general contracting business to have a competitive advantage, you need to ensure you’re in the public’s eyes and lips. You may opt to use the traditional ways of marketing like newspapers or use modern-day technology where you can reach wider markets through different online platforms.
Get the Workforce
This is among the key roles of general contractors. You’ll need to establish a workforce for the different roles needed on a construction site.
Come up with a Pricing Strategy
Coming up with a pricing strategy is an involving task in your contracting business. The most important thing to keep in mind, according to the general contracting business guide, is that the prices of the services offered should be affordable to the customers.
Know the Rules that Govern the Construction Industry
Another general contracting business guide tip is to ensure that your contracting business complies with the rules and regulations that govern the industry. Try to learn these rules to avoid trouble down the road.
Services Offered By General Contractor Businesses
It’s important to clearly define the services you offer. These include, but aren’t limited to;
Risks That General Contractors Face
1. Safety and Health Hazards
The U.S. construction industry is ranked second for fatal injuries globally. According to The International Labour Organization, 60,000 fatal accidents occur annually. This is a clear indicator that this industry isn’t the safest to work in. However, if all workers are keen to follow all the guidelines that have been set and avoid shortcuts, the number of personal injury cases and fatalities would decline. To ensure you and your business are protected, have a workplace injury attorney or slip and fall accidents attorney on speed dial as these are the most common workplace injury situations.
2. Missing PaperWork
There are many documents involved in a general contracting business. If any of them were to go missing, locating them would take up so much time, effort, and money that would have otherwise been channeled to other areas. Such vital documents may include preliminary notices, and pay apps, among other documents. It’s important that contractors have an effective and safe filing system and not use the dashboards of their trucks as filing cabinets.
3. Poor Project Management
When a project manager or general contractor lacks people skills and hence can’t effectively communicate instructions to sub-contractors such as roofers, disputes may arise, resulting in a wastage of time and materials. The ripple effect of poor project management could mean that an electrical contractor can’t finish a job within the stipulated time during a home remodeling project, consequently delaying the next subcontractor.
4. Fluctuating Availability and Pricing of Materials
This is one of the main risks that come with the job. When negotiating for a job, make sure to leave wiggle room for instances where the costs of materials are higher than estimated. Factors that may contribute to the availability and pricing of materials include natural disasters, trucking issues, and changes in demand.
5. Shortage of Labor
In our general contracting business guide, labor or manpower is important, regardless of the size of the project. Getting efficient and effective human resources in construction is not an easy task. Sometimes the workers are not sufficient to get the job done, which results in pushed timelines.
6. Change Orders
Also referred to as variation orders, change orders are mini-contracts that omit work that has been agreed in the main contract; alter the work agreed upon in the main contract, or; add on to the work agreed upon in the main contract. Although not inherent, change orders are a risk that, if not carefully managed, may result in huge losses.
7. Poor Communication By Stakeholders
From the beginning of a construction project to its conclusion, effective communication with all involved parties is essential. Be wary of a project owner who requests you to submit a proposal for a project with incomplete drawings and a vaguely defined scope. If you submit a bid without all the necessary details, there will inevitably be design problems, scope creep, and conflicts.
Ask for all the necessary information upfront to avoid these nightmares. This will give you a rough idea of what building techniques and supplies you’ll need for the project before submitting your proposal. Once you’ve secured a project, maintain clear communication on your end and capture the most crucial details in writing.
Factors To Consider When Picking Contractors for your Business
Here’s a general contracting business guide on factors to consider when choosing a contractor for a job.
The Reputation of the Contractor
The reputation of a contractor is arguably one of the most essential assets to have. When a contractor has established a name for themselves as reliable and honest, you can rest easy knowing they’ll deliver quality work in all the tasks you assign them.
Among the things to negotiate with your contractor, your deadline shouldn’t be one of them. Delays can be expensive in the construction industry. It’s your responsibility to check a contractor’s record on meeting deadlines before agreeing to work with them.
Customer experience is critical for every business. Hire a contractor who agrees with this statement and one who can prioritize understanding what the customer wants by listening and addressing concerns and finally delivering on the promises made.
Construction is a process that involves decision-making in all the different stages. It’s essential for contractors and clients to have timely, open communication to address all issues that arise throughout the process.
Quality of Work
If you’re looking to hire an asphalt paver, head to their business page or website and check out the projects they have previously worked on, and their reviews too. This is one of the best ways to determine the quality of work a particular contractor produces.
How to Protect Your Business When Hiring A Contractor
Other than price, consider these factors as well:
- Typically, a licensed, reputable contractor would cost more than an uninsured, unlicensed one. As much as you want to get the best deal, be careful not to get a deal that is too good to be true. Sometimes, cheap can be expensive in the long run.
- Avoid lump sum payments: Not all contractors require down payments, but in case they do, avoid paying a huge amount upfront. Instead, space out your payments and only make a payment after the contractor has completed a pre-agreed milestone.
- Ask for references: If you know someone who recently hired a contractor you’re considering hiring, ask them if they were happy with the work they did. If they are, such a contractor would make a great hire since you’re somewhat guaranteed or have an idea of their ethics and quality of work.
- Get a written contract: Often, the people you hire as contractors are not known to you, at least not on a personal level. Therefore, you need to protect both yourself and your business from these ‘strangers’, and the most certain way of doing this is by having a written contract. The contract will prohibit the contractor from inventing mysterious charges that were not part of the agreement, and in case they don’t deliver as per the agreement, the contract gives you the legal right to make demands.
According to IBISWorld, there has been a 3.4 percent growth in the number of construction businesses in the United States. If you haven’t used the services of one, you might require one soon for that home revamp project you’ve been thinking about.