Do you consider yourself handy? Are you thinking about turning your generalized skills into a business? Breaking into the general contracting business can require a little commitment and dedication upfront, but once you complete all the state requirements, you’ll be well on your way to a profitable business. This guide covers tips and tricks to quickly move you from an interested contractor to a business owner.
Create A Business Plan
Before working toward starting your general contracting business, it can be valuable to create a business plan. A business plan outlines the service types you plan to offer, which can also guide you on the best license type to choose. Tennessee offers different licenses based on the structure types and project value, so having a good understanding of your business goals is essential. A business plan should be as detailed as possible, including the project types, number of employees, marketing strategies, and your experience.
Calculating the costs of business ownership can help you plan ahead. You’ll need enough funds to promote brand awareness, hire employees, and purchase necessary equipment. Of course, you’ll also have to pay for state licensing to ensure you work legally. Be sure to include both upfront and ongoing costs. It can take a business a few months or years to become profitable, and in the meantime, you’ll have to cover the costs. Understanding your costs and expected earnings ahead of time can also make it easier to obtain financing if this is how you plan to fund your business.
Work Toward Your License
A valid general contracting license is a crucial part of working as a contractor in Tennessee, whether as an employee or in your own business. Tennessee requires a score of at least 73% to pass the exam. Signing up for a pre-licensing course is an excellent way to prepare and do well on your exam. This can also help speed up the process of getting a Tennessee contractors license, allowing you to start earning faster.
You’re not quite done yet once you successfully complete the exam. The state of Tennessee also requires general contractors to carry general liability insurance. The exact insurance policy you’ll need depends on your license type and the maximum value of projects you can work on. You can usually expect insurance requirements between $100,000 and $1.5M. Depending on how many employees you hire, you may also need workers’ compensation.
Meet With a CPA
The last document you’ll need when applying for your state license is a prepared financial statement. Tennessee requires that this financial document come from a certified public accountant (CPA). You should include this document with a letter of reference that outlines your trade experience and a completed application that’s signed and notarized.
Understand State Laws and Register Your Business
Choose a business name and register it with the state of Tennessee. Choose the appropriate incorporation when registering your business. Many contracting businesses opt for a limited liability license (LLC). This may also be a good time to open a business bank account or credit card to separate your expenses. Doing so will make it easier to claim expenses and file taxes come April.
It’s also a good idea to brush up on the state’s laws and regulations. Otherwise, you could be at risk of expensive fines and penalties, which could cut into your earnings or, worse, threaten your business as a whole. For example, it’s illegal in Tennessee to bid on jobs exceeding $25,000 before you have your general contracting license.
Celebrate and Put Your Business Plan Into Action
Once you have your license in hand, you’re ready to get started. Spend a little time celebrating this huge accomplishment, and then get ready to put your business plan into action. Ramp up your marketing efforts and let those in your community know that you’re open for business. Some new business owners may even work with a marketing agency that can help with creating a marketing strategy.
Make sure you keep continuing education requirements in mind, as Tennessee requires a minimum of eight hours every two years to maintain your contracting license. You may also decide to expand your existing license to bid on and complete larger projects or pursue additional licensure for specialized skills. Becoming licensed in electrical, roofing, plumbing, or HVAC work can make it easier to find more business. Some general contracting business owners may complete even more continuing education hours than this to ensure they’re up-to-date on the latest laws and industry standards.
General contractors have a lot of employment and business opportunities in the state of Tennessee. Whether you want to help homeowners make renovations or be involved in building the largest new commercial districts in your city, you have a lot of options once you complete your license.