How to Get Started as a General Contractor
Apr. 4, 2022
Historically the construction industry sees a boom after an economic recession, driving skilled contractor demand higher than the supply. Commercial contracting and construction are rewarding if you learn fast and work hard, but after years of working under someone else, is it time to become a general contractor?
The project is your responsibility, even if it’s just an installation, service maintenance contract, or repair. Becoming a general contractor isn’t easy, but you become your boss and are responsible for your own success.
General Contractors Eligibility Criteria
The minimum requirements for general (or prime) contractors are:
- High school diploma or GED
- Ability to work legally in the United States
- Clean work record
- 4 years of experience at the journeyman level or above in the past 10 years
- Pass the contractors license exam
The general contractor license opens opportunities, but you must have previous experience and knowledge. Commercial general contractors have years of industry experience and relevant certifications and licenses and some earn Bachelors’s and Master’s degrees for more current industry knowledge.
Plumbing, HVAC, or electrical specialty contractors might want to open their own general contractor company, but owners must know what’s required to evolve into a general contracting business.
Contractors License Exam
Find out if your state requires a contactor’s license. License requirements differ depending on the state, so follow these rules. Contractor license types can also vary depending on the work you want to do.
The contractors license exam requires business management and construction law knowledge. But be aware that specific exam topics may differ state by state. California’s contractor license exam, for example, covers general engineering and general building to specialized topics like electrical, fire protection, plumbing, water conditioning, and more.
Also, note that license requirements can differ at the state or local level. The state might not require a license, but cities and municipalities might require one. While it’s possible to work without a contractors license, it’s not worth it. And companies may not even consider working with you without a valid contractors license.
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Add to Your Existing Knowledge
Modern construction projects are massive, complex, and require a lot of planning. Changes to architectural and engineering plans, finance adjustments, and legal can modify the project scope and direction. GCs have to understand the changes and the impact on budgets and revenue.
Your job is to stay up-to-date on building and construction industry data and trends that can affect your business. The ability to react and pivot will help keep your company alive because you will find alternatives to keep the cash flow coming. Learning functional skills in engineering, accounting, and project management will also help with business insights.
Add New Skills
You must have business management skills as a GC.
The owner manages the day-to-day:
- Field technicians
- Office staff
- Client and customer relationships
- Monitor financials
- Federal and local regulations and compliance
- All the paperwork
But there is another subset of skills you will need:
- Project bidding
- Financial management, budgets, and accounting
- Subcontractor management
- Building regulation compliance
- Managing high-value client relationships
Some of these are on-the-job skills, but business management knowledge helps build strategies to grow and scale your company.
Create Your Business Plan
When you’re ready to start your general contractor business, you’ll need to create your business plan and establish your company. A business plan is the roadmap of your business and goals. You will need to decide how to structure your business.
What type of business entity will you have?
- Limited Liability Company (LLC)
- S Corporation
- C Corporation
What type of contracts will you accept?
Where will you find customers?
- Social media
Your business plan also considers costs – initial start-up costs, expected revenue, and balancing expenses. If you need a bank loan, the bank can use your business plan to determine financing eligibility.
Insurance, Regulations, and Safety
With the license and certifications, you will need business insurance to cover yourself, employees, and potential subcontractors. Worker’s compensation is also a requirement depending on the state. Worker’s compensation covers employees and subcontractors injured on the job, and business insurance protects you from claims, damages, and lawsuits.
You will need surety bonds, known as contractor license bonds. These guarantees are similar to insurance, given to clients as proof that you complete the job as promised and follow regulations, or they get their money back. General contractor license bonds are a requirement in most states.
Along with insurance and surety bonds, Occupational Safety and Health Administration (OSHA) safety regulations must be followed and complied with to ensure a safe working environment. You must follow all applicable OSHA standards as an employer.
Outside of federal and local regulations, you should have business-level safety standards for all employees. If you plan on offering HVAC service, use a safety checklist.
When you’re planning your GC business, think about technology that reduces physical paperwork, like cloud-based software or a construction platform that includes mobile app support. This will let you sync safety checklists and tasks digitally.
Start Small to Build Your Reputation
Now that you’ve finished all the regulations, licensing, insurance, and business setup, you can find clients. Don’t expect to start bidding for a large government or industrial contract, you won’t have the reputation or experience for projects this size.
As a new general contractor, you need to build up your customer list, complete jobs, and create a solid and positive reputation. Start with smaller jobs by reaching out to your existing network and relationships.
Old colleagues, former employers, friends, and family are great sources for early jobs and projects. Finishing these projects adds to your business’s reputation and can help earn more recommendations and referrals.
Eventually, you will hire more employees to support the growing business. Your office staff will play a big role in keeping track of jobs, technicians, financials, and more. Field technicians will be key to growth since they will allow you to take on more jobs.
Invest in a cloud-based field service management and project management platform early. It will centralize and digitize your business day by removing physical paperwork, so you stop wasting time searching for customer info. And your techs will be able to accept more payment options with a connected mobile app.
Specialty Subcontracting as an Alternative
General contracting can be a lucrative career, but you might not want to manage multiple departments and deal with all levels of construction and service.
Subcontracting is a great option for people who want flexibility and freedom while still owning their own business. A subcontractor will specialize in a construction and service sub-industry like HVAC, plumbing, mechanical, etc.
It’s common for a general contractor to hire subcontractors for projects that require more onsite hours than the GC has internally or to fill in existing skill gaps. Over time, a subcontractor might develop a partnership to become the preferred company for the general contractor.
Subcontractors still need to set rates and build up their own business but can focus efforts on scaling. You will still need software to help organize jobs, dispatch technicians, customer management, and quotes and invoices. Adopting a field service management software platform early will build efficient workflows across the business.
BuildOps’ field service management cloud-based platform is designed for specialty commercial contractors with features to optimize operations:
- Customer management
- Project and job management
- Accounting integrations
A field service management and scheduling software should deliver a best-in-class experience to lower operational costs while raising potential revenue. You might think that lower operations cost means fewer employees, but the first place you should look is the technology you are or aren’t using. An investment in cloud-based field service management and commercial service software will save you money.
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