According to the U.S. Bureau of Labor Statistics, the
construction industry is one of the nation’s largest industries,
employing 1.8 million self-employed and unpaid family workers in 2008.
And it’s not all “heavy construction” — 64 percent of these jobs fall
in the specialty trade contractors sector, including plumbing, heating
and air conditioning, electrical, and masonry!
Despite the recession, the construction industry (in all its forms)
still offers more entrepreneurial opportunities than many other
industries. Of course, it takes much more than basic handyman skills to
become a skilled tradesman and business owner. But if you are
interested in starting or growing a construction, home improvement or
general contracting business, here are some business and regulatory
basics that you need to be aware of.
Don’t start anything until you’ve done your research and developed a
business plan – that’s Step 1.
Other considerations include financing your venture, finding the right business
location (zoning laws will play a big part in
determining where you base your business and how you use that property),
as well as understanding federal and state business registration
Read 10 Steps to Starting Up to better
understand and navigate the key planning, financial and legal decisions
involved in starting a business.
Licensed, Bonded and Insured?
Savvy clients will always look for a contractor who is “Licensed,
Bonded and Insured”. Why?
A license demonstrates that you are competent and
permitted to conduct business in the city, municipality, or state in
which the license was issued. To be “Bonded” means that
a third party has promised to pay (a Surety Bond) if you do not fulfill
your work obligations under a contract (giving your clients that little
extra reassurance they need when dealing with a stranger.) Insurance
ensures that you are liable for “on the job” accidents – not your
Here is more information on how to get licensed, bonded and insured:
1) Licenses and Permits
Most construction-industry activities are regulated by state and
local governments, for example a tradesman license is usually required
for electrical, plumbing, HVAC, gas fitting, asbestos abatement and lead
abatement work. You’ll also need specific permits based on where and
how you conduct your business.
Use this handy License & Permits Tool to pin
point the exact license and permits you’ll need. Search by your
city/state and select “Construction Contractor” as your business type.
Your local government can also advise on how and where you need to
display your license number.
The Small Business Administration (SBA) guarantees Surety Bonds, but
as with any SBA-backed business loan, you must apply for a surety bond
through a surety company or bonding agent.
The SBA has advice on the process here: “How to apply for an SBA Surety Bond
3) Business Insurance
Depending on the nature of your work and whether you employ workers
directly, you will need to consider several business insurance options.
These range from general liability insurance to professional liability
insurance and workers’ compensation insurance.