How to Start a Contracting Business

Learn how to start a contracting business with real-world tips, personal insights, and a step-by-step guide for lasting success.

So, you’re thinking about starting a contracting business? Let me tell you,  you’re not alone, and you’re definitely not crazy. I remember sitting in my garage one summer evening, nursing a cup of burnt coffee, staring at my old toolbox, and wondering: “Can I really do this? Can I start my own contracting company and make it work?”

Fast forward a few years, and I’m not only running my own small but thriving contracting company, but I’m also here to help you do the same. If you’re asking questions like “how to start a contracting company,” or “how to open a contracting business,” or wondering how to start a contracting business the right way, then keep reading. I’m going to walk you through everything I wish I had known in the beginning,  without the fluff, just real talk, real steps, and real lessons. We’ll even touch on things like what licenses are needed to start a construction business and how to start a government contracting business if that’s the path you’re eyeing. And if you’re looking to become a startup founder in the contracting world or beyond, this guide will give you the practical jumpstart you need.

Why You Should Start a Contracting Business 

Let’s start with the reason why. You may have been working for someone else for a long time. You could be bored of someone else deciding when you work, how much you make, and how much you can make. Or maybe you just have good hands, a knack for constructing, and a desire to be your own boss. All good reasons.

I started because I wanted to be free. I wanted to pick up my kids from school without having to ask for time off. I wanted to do the tasks I enjoyed and turn down the ones I didn’t. If it makes sense to you, you’re in the correct spot. If you’re still not sure what a contracting firm is, you’ll soon find out that it’s more than just swinging a hammer. It’s a full-blown enterprise that requires ability, hard work, and business sense.

But before you start purchasing business cards and putting your logo on your truck, there are some important things you need to know about how to establish a contracting business in a way that works and lasts. 

Step 1: Define Your Niche and Take Control of It 

Let’s not kid ourselves: contracting is a big field. Do you want to work as a general contractor, or do you want to focus on one area, such plumbing, electrical work, carpentry, or HVAC? Whether you’re writing a business plan for a general contractor or trying to establish something more specific, it’s important to know where you’re going.

I did everything at first. Not a good idea. I burnt out quickly, took on work I shouldn’t have, and had to start over with my reputation.

Focus on one thing. 

• Do what you do best. What you like. 
• What you can establish a good name for yourself around. 
• What skills do I have that I can use? 
• Do people in my region want this kind of work? 
• Can I really afford the expenditures of starting up in this niche?

When you know what you want, your brand, your clientele, and your marketing plan all become clearer and work better. 

Step 2: Write a business plan, even if you don’t like paperwork. 

I used to think that business plans were only for banks and IT businesses. But when I eventually composed one, I saw that it’s just a plan. It helped me transition from “hoping for the best” to having a real plan. It’s a very important element of learning how to run a contracting business like a pro. Planning ahead, whether it’s a simple sketch or a detailed business plan for general contracting, keeps you from getting into a lot of trouble. 

Your Business Plan Should Have: 

• Your goal (why you’re doing this) 
• The people you want to sell to 
• The things you do Costs of starting up and running 
• Strategy for pricing 
• Plan for marketing 
• Money predictions

You don’t have to write a whole book. Simply make sure you know what you want to do and how you’re going to do it. 

Step 3: Sign up your business (yes, you have to be legal) 

This is where it becomes official. And yes, there is paperwork involved. You will need to do the following depending on where you are and how your firm is set up:

• Pick a name for your company 
• Sign up with your state or local government 
• Choose a legal structure, like a single proprietorship, LLC, or corporation. 
• Get an EIN, or Employer Identification Number 
• Set up a bank account for your business

I picked an LLC because it protects me from responsibility and is easy to understand. You might want to go to a business lawyer or accountant to figure out what’s best for you. 

Step 4: Get a license, a bond, and insurance. 

This is not up for discussion. Your clients want to know that you are a real person. Also, you’ll need it to get permits and avoid big fines. 

Common Requirements: 

• License for contractors: Changes from state to state and trade to trade 
• Most of the time, your city or county gives you a business license.
• Insurance for general liability: Covers injuries and damages 
• Bonding: It makes your clients feel safe.

I discovered this the hard way. I got halfway through a job before I realized I wasn’t licensed in the next county over. It cost me a lot of money. Don’t be me. 

Step 5: Get Ready (Tools, Truck, and Tech) 

This portion is fun, but it costs a lot.

You undoubtedly already have a lot of tools, but if you want to establish a contracting business, 

you need to think about:

• Reliable transportation (your truck is now your mobile office) 
• Upgrading or replacing tools 
• Safety gear, 
• such as ladders, scaffolding, and so on.

Also, don’t forget about tech and software. I utilize project management software like QuickBooks and Jobber to provide estimates, invoices, schedule work, and talk to customers. It makes me look professional and keeps me calm. 

Step 6: Set the Right Price for Your Services 

One of the hardest elements of beginning a small contracting firm is deciding what to charge.

Too low? You don’t have any money. Too high? Someone has ghosted you. 

This Is What Helped Me: 

• Look into your local competitors 
• Know what your overhead costs are (gas, supplies, insurance, etc.) 
• Keep an honest record of your hours 
• Make sure you have a profit margin (You aren’t a charity)

I built a spreadsheet and figured out how much each job really costs. I also started to wonder, “Would I be happy doing this job for this pay if it took twice as long?” I boosted my price if the answer was no. 

Step 7: Create a brand and an online presence 

You don’t have to be a full-time influencer, but if you’re not online these days, you might as well not exist. 

Things you need: 

• Business cards and logos that seem professional 
• Website providing evaluations, service descriptions, and a way to get in touch 
• Profile for Google Business 
• At least Facebook and Instagram are social media sites.

Word of mouth and Facebook groups helped me get my first dozen clients. A clean brand, clear information, and pictures of what you did before and after go a long way. 

Step 8: Advertise your business as a contractor 

Let’s be honest: marketing never stops. It’s not just “set it and forget it.” I started modestly by putting up posters on my truck, posting in local organizations, and asking happy customers to tell their friends about me. 

What Helped Me: 

• “Refer a friend and get $50 off your next job!” are examples of referral schemes. 
• Flyers in stores that sell supplies 
• Working with property managers and real estate agents 
• Yelp and Angi are two examples of online directories.

You don’t need a lot of money for ads. You only need to be there and stay the same. You need to learn how to keep your contracting business thriving if you want to start one. 

Step 9: Get a Good Name You Feel Proud Of 

There will be employment, but what about the recurring work? That’s all about how people see you.

Be on time. Complete what you begin. Say what you mean. Take responsibility for your mistakes (because you will make them). These are the basics that most contractors forget about.

I don’t know how many jobs I’ve gotten just because someone said, “You really called me back.” 

Step 10: Only scale when you’re ready

Once you get going, it’s easy to want to hire people, take on big initiatives, and grow quickly. But I think you should grow slowly.

After six months, I hired an assistant, and I didn’t recruit a second staff until the second year. This let me teach them well, keep the quality up, and prevent cash flow problems.

Think about:

• Do I have enough steady work? 
• Can I pay for training, insurance, and payroll? 
• Can I keep the same level of quality and reputation? 

Things You Shouldn’t Do 

I did all of them so you don’t have to:

• Not paying enough taxes (Save 30% of each check!) 
• Not making clear what you will and won’t do with clients
• Not signing contracts or formal agreements 
• Ignoring your gut sense regarding a questionable client

Key Takings: 

• Starting a contracting business is one of the scariest, most exciting things you can do. It’s not easy. You’ll question yourself. You’ll mess up. You’ll want to quit.

• But you’ll also grow. You’ll learn. And you’ll build something that’s yours.

• I won’t pretend it’s all sunshine and sawdust. But if you follow these steps and stay committed, I promise it’s worth it.

• So go on. Take that first step. Open that business. Start contracting company dreams into reality. Want to know how to start a contracting business that actually works? Start by believing you can. Whether you’re starting a contractor company, figuring out how to start your own contracting business, or even learning how to start a government contracting business, it all begins with the decision to go for it.

Additioal Resources: 

1. SBA: 10 Steps to Start Your Business: The U.S. Small Business Administration offers a clear, comprehensive roadmap for launching your business, from planning to registration and licenses.
2. SBA: Become a Federal Contractor: Covers everything you need to know to work with the U.S. government—qualifications, registration, certifications, and compliance essentials.
3. GSA: Register Your Business for Government Contracts: Step-by-step guide to setting up your business in SAM.gov, identifying NAICS codes, and preparing for GSA contracting opportunities.