Do you believe you have what it takes to be a general contractor? Being a successful general contractor in the construction sector requires extensive knowledge, excellent interpersonal skills, and the ability to run a business. Nobody becomes a licensed general contractor overnight, it takes years of experience. Even if you’re starting from scratch, you can come up with a strategy to become a professional one day. But before you go there, you need to know the basics of how to become a general contractor.
The majority of the contractors are self-employed and own their businesses. By becoming a general contractor, you can be your own boss. This is what makes the job lucrative, not to mention the huge scope for profit. However, it could be challenging at times. Due to unforeseen delays, project deadlines, and overtime requirements, this job demands hectic travel across numerous construction sites, which may be rather stressful. Besides, the industry is fairly competitive, which requires you to be at your best at all times.
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To begin, a contractor is somebody who works on a job-by-job basis rather than for just one company. Contractors are responsible for their own taxes, company insurance, and retirement plans. A general contractor (GC) is someone who is engaged to oversee a construction project. This includes working directly with the client, managing other employees, placing orders with vendors, and obtaining official permissions. They are normally in charge of a team of experts. To be a general contractor, they must also be familiar with all areas of a project, from material budgeting to site safety.
But before you start worrying about any of these specialized tasks, you need to obtain a formal apprenticeship as well as a license to work as a general contractor. Although it is not complex, the process does involve some technicalities, which can be a bit confusing for some people, especially those who are rather new to the industry. But don’t worry. We’ve got you covered.
In this blog, you will find a complete guide on how to become a licensed contractor. Just follow the steps, and you’ll be ready to kickstart your dream career in no time.
1. Educational Qualification
To answer the question “how to become a contractor” we need to first talk about the educational qualifications required for the job.
A high school diploma or its equivalent is required to become a contractor. However, some contractors continue on to earn an associate or bachelor’s degree, particularly if they are interested in management or are indecisive about their professional choice while in school.
A four-year college degree is typical, and a prospective contractor’s curriculum may include, but is not limited to, structural science, building, economics, statistics, and other financial components. A few universities offer various degrees in development and management. Some contractors may choose to further their education in order to be a more competitive job candidate or to climb to more senior positions.
2. Formal Training
While still in school, you might want to look into hands-on training to help you apply what you’re learning in class and to beef up the experience portion of your CV. Consider becoming an apprentice during this period to learn from a more experienced professional while also expanding your network for career assistance and asking industry questions.
In addition to educational qualifications and apprenticeship requirements, there are some other conditions if you want to become a general contractor in the USA. First, you need to make sure that you have the legal right to work in the country, a clean record (no felony convictions), and 4 years of experience at the journeyman level or above in the past 10 years.
3. Obtaining a License
If you want to know how to be a general contractor, first you need to find out whether your state requires a general contractor’s license. Most states in the United States necessitate licensure, with exceptions like Colorado, Florida, Indiana, Kansas, Louisiana, Missouri, New Hampshire, New York, Ohio, Pennsylvania, and Wyoming. The types of contractor licenses can also differ depending on the type of work you intend to perform.
In order to obtain the license (where applicable), you must take and pass the contractor license exam. The contractor’s license exam requires knowledge of company management and construction law. However, keep in mind that individual exam topics may vary by state. The contractor licensing exam in California, for example, includes everything from general engineering and general building to specialist topics like electrical, fire prevention, plumbing, and water conditioning.
Also, keep in mind that license requirements can vary by state or municipality. The state may not need a license, but cities and municipalities may. While it is feasible to work without a contractor’s license, it is not worth the risk. Companies may refuse to work with you if you do not have a valid contractor’s license.
4. Build Your Skill Sets
Once you get your GC license, it’s time to prepare yourself as an efficient contractor and business owner. To this end, you need to upgrade your skills as a general contractor. As a contractor, you’ll need to manage an expansive range of staff, including field technicians, managers, back office personnel, and, of course, customers. In addition to this, you need to take care of the paperwork, monitor finances, ensure compliance with local and federal regulations, and manage administrative tasks. Make sure you hone these skills and keep working on them.
But that’s not all. As a general contractor, you need an additional set of skills. This includes:
- Project bidding
- Making estimates
- Bookkeeping and accounting
- Maintaining regulatory compliance
- Managing high-value clients
- Customer retention
- Subcontractor management
In today’s time, however, most of these tasks can be managed and simplified using a general contractor management software system. Programs like Field Promax enable you to automate business processes, including scheduling and dispatching, creating estimates, monitoring field technicians, billing, and invoicing.
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5. Create Your Business Plan
Creating a strong business plan should be one of the first actions you take when establishing any firm. A professionally designed business plan can help you obtain a better grasp of your long-term goals and will serve as proof of concept for the future success of your organization.
Many folks miss this important step entirely; do not make this mistake! The process of developing your company plan is simple. It is the business blueprint that outlines each step of your business journey. If you intend to apply for small business loans, be extremely thorough. Before providing you with a loan or funding for the firm, most financial institutions and interested investors will need to analyze your business plan.
In general, your business plan should include the following elements:
- The structure you propose to establish for your company (sole proprietorship, partnership, LLC, or corporation)
- Description of the company, concept, and strategy
- The services you will offer
- The type of task you intend to do
- Specifics about your intended market
- How many staff will you have at the start, if any
- Estimated beginning expenditures, including equipment, business permits, and so on.
- Financial forecasts (how much profit do you expect to make in years one, five, and so on)
- Competitor analysis
6. Choose a Name for Your Company
Choosing a name for your company is an essential component of beginning a business. Potential clients should be able to quickly read and recall your company’s name, as well as understand what your general contractor company specializes in. Choose a professional name that accurately portrays the services the business intends to provide to the market, and avoid names that may raise uncertainty about what you offer.
You must also make sure that the name is available, i.e., no other company is currently using it. A quick Google search for similarly named businesses is a quick way to see if they are already taken, but it is not particularly reliable. You may also do a domain name search to determine if the URL for your company name is already in use.
7. Register Your General Contractor Business
Once you’ve decided on your perfect business name and organizational structure, you must register the business with the state and form a legal entity. You can get the registration paperwork from your state agency’s website or office, or you can register online. Registration fees vary by state but are often less than $200.
If you intend to hire employees or operate as a corporation or partnership, in addition to registering your firm, apply for an employment identification number (EIN) with the IRS.
8. Get Insurance and Bonds
Protect yourself, your clients, and your business by obtaining the necessary permits, bonds, and insurance to lawfully conduct your business.
The quantity of insurance coverage required by your business is determined by various criteria, but you will nearly always be required to have some type of coverage. Aside from general liability insurance, you may also require property insurance and car insurance. If you intend to hire your own personnel, you will also require workers’ compensation, state disability insurance, and unemployment insurance to safeguard them.
In addition to licenses and insurance, your business might also benefit from bonds. Construction bonds are often required for all general contractor businesses to operate. Surety bonds protect your client if you fail to meet your contractual responsibilities. Surety bonds, like any other sort of insurance, are issued by a third party and require you to follow state requirements, which vary from state to state.
9. Hire Subcontractors
Becoming a general contractor is relatively easy. What makes the job challenging is maintaining service quality and consistency. And to this end, you may rely on subcontractors to do the job on your behalf. It is not unusual for subcontractors to complete a large portion of the work on your projects. Hiring the right people with the right skills and reputation for the task is a full-time job in and of itself, and it’s a crucial aspect of your general contractor business. After all, your clients will be counting on the finished product from you and your subcontractors.
You must be aware of the tax ramifications and legal formalities of recruiting and paying your staff, whether you want to engage your own employees, deal with independent contractors, or outsource work to various subcontractors.
Differentiating between employees and independent contractors can have an impact on your bottom line since it influences how you withhold taxes and avoid costly legal penalties. Before hiring your first employee, educate yourself on the distinctions.
Independent contractors run their own businesses and bill clients directly for finished services. Under some conditions, independent contractors can legally be considered employees. If it is later decided that your contractor meets the legal definition of an employee, you may be required to pay back taxes and penalties, provide benefits, and reimburse salaries.
Final Thoughts
Following these steps, you can easily figure out how to be a general contractor. But that does not ensure business success. To make sure your company stands out and sustains, it is not enough to just be a general contractor, you need to be a good one at that.