After you complete contractors' school and get a professional license, you may decide to start your own business. You know you have the knowledge and experience to be your own boss in the construction industry. However, skill in construction might not equate directly to skill in budgeting, which is a very important aspect of any business.
Below is some advice for contractors who are starting up their own business.
Create a Business Plan
A lot of steps go into a business plan, but it's an essential part of your business. The business plan will help you test the feasibility of your startup business as well as make a plan for funds both coming in and going out. Below are some of the items that you should include in your business plan:
- Executive summary: An overview of your plan
- Business description: Services you will offer
- Market analysis: A comprehensive look at the market for your services
- Competitive analysis: A comprehensive look at existing contractor companies
That data will help you form a plan for operations and finances. For instance, your operating plan must include all information related to facilities, inventory, and equipment. With a startup contractor's business, you might need a huge outlay of money on that end. Your financial plan should help you identify sources of revenue and provide a path to making a profit.
Start with Costs
The next budgeting step is to take an in-depth look at costs. Indeed, your budget should always start with costs, not revenue. By focusing on costs first, you can determine the price of your services and develop a plan for spending.
Direct costs include any expenses related to projects you'll complete. The expenses are materials, labor, and any equipment you'll rent. Concerning labor, remember it includes not just hourly wage, but also taxes, insurance, and any benefits you provide.
Next, look at both fixed and variable costs. Fixed costs include anything you have to pay regardless of whether you have a project or not (such as rent for a storage unit). Variable costs change regularly. These costs can be office expenses, vehicle repairs, or printing costs.
All of those costs tell you what our overhead is. With that information, you can determine your break-even point or the amount of money you need to make to stay in business. Any revenue made beyond that point is profit. Be aware that profits might not start until a few years down the road.
Plan for Budget-Saving Measures
When you see all the costs represented above, you may feel the financial burden is massive. You do need a fair amount of money to start up a new contractor business. However, you can also plan for ways to save on your budget.
For one, make a habit of always shopping around for the best price. Do this when you're shopping for supplies for a job or even for your office space. Look around for any deals related to equipment rental, too. Get quotes for insurance and cell phone service before settling on one company.
Likewise, if you have a company truck, make sure you have a preventative maintenance plan in place. That way you'll save on repairs. Additionally, you should be able to keep your truck longer, which will save in revenue down the road.
Set Money Aside for Marketing
One area where you don't want to cut costs is in marketing. When you're a startup contractor, you may not have the same reputation as companies who've been around longer. So, you want to get your company's name out there with marketing.
Start with internet marketing, like blogs and social media. Beyond that, you want to have money in your budget for other marketing, too. Another option is to rent out a billboard or some other traditional form of advertising. Signage for your sites is also a good investment.
Learn more about what it takes to start up a contractor business at
Golden State Contractors School.
