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Do You Have the Expertise to Make Your Contracting Business a Success? How do you know if starting a contracting business is the right move for you?

By Entrepreneur Staff


In Start Your Own Construction and Contracting Business, the staff of Entrepreneur explain how you can get started in the construction and contracting industry. Whether you're interested in building homes or prefer contracting the services needed to get the job done, this guide will help you determine what type of construction or contracting business is right for you. In this edited excerpt, the authors offer advice on the technical and management skills that will help you succeed as a contractor.

Beyond character traits are a host of abilities that contractors must have in order to succeed. The best and most successful contractors have a good balance of technical skills and business management expertise.

But as skilled as they may be, many contractors like to keep up to date with the latest advances in their field by taking advantage of opportunities for continuing education. There are many avenues available for learning about new products and techniques:

  • Seminars presented by suppliers of the materials a contractor purchases.
  • How-to seminars given by home improvement stores like Home Depot and Lowe's.
  • Conferences and classes offered or sponsored by industry associations.
  • College courses on campus and/or online are available on anything from general contracting to general construction management to pipefitting and sprinkler fitting. Such courses can be found at or, which provides a similar listing of courses. You can also check local college course listings in your area.
  • Industry-specific magazines, newspapers, blogs or websites.
  • The government-sponsored Small Business Administration ( also offers education and help to all small businesses.


Contractors don't like to admit it, but many lay people, including their clients, are able to do similar work. Perhaps not quite as well and certainly not as fast, but they can do many tasks that contractors are experts at. The DIY (do-it-yourself) retail market is huge; the combined revenues of Home Depot and Lowe's are over $120 billion, representing more than 70 percent of the industry. And if you do a Google search on how to do a certain type of project, chances are you'll find it.

However, beyond their natural skills and personalities, contractors possess two things that most of the public doesn't have. First, they have the time to do the work. Most homeowners and amateurs can only work nights and weekends; their regular jobs prevent them from working full time on their projects. Contractors have the ability to complete a project quickly and with minimal disruption to their client's household.

Second, contractors have the right tools to do the job. While the equipment rental business is fairly large, many homeowners are uncomfortable using expensive tools. Some tools and equipment aren't available for rent due to liability issues; other equipment, such as a dump truck, usually isn't available on a short-term basis. Often, when a homeowner rents a particular tool, they botche the job because they don't have enough experience to use it properly. Having the right tools is one of the keys to success in the contracting industry.

Learn the lingo

Because contractors often work with other contractors on the same job site, they have to understand what the others are doing so they don't "step on each other's toes." They should be able to read and understand blueprints of the building and the landscaping so the materials they're installing don't interfere or conflict with what the other contractor is doing. For example, the irrigation contractor must be able to read the landscape plan and the grading plan in order to efficiently design the sprinkler system; the low-voltage outdoor lighting specialist must understand the electrical plans in order to design a lighting plan that reduces voltage drop and does not conflict with the full-voltage lights specified for the home.

A development project comes together more successfully when all the participants understand each other's responsibilities and what the scope of their work includes. While they don't necessarily need to know how to do the work of the other contractors, they must understand the concepts and terminology used by them.

Money issues

President Thomas Jefferson once wrote, "Never spend your money before you have it." This little truism has wide implications for the contracting industry because of the seasonal and cyclical nature of the business. There are three important issues relating to money that everyone contemplating starting up his or her own business should understand.

A Nest Egg. Conventional wisdom states that a new business owner should have savings in the bank to cover at least six months of personal expenses. Every potential business owner must take the time to learn how much money they've spent over the past 12 months and estimate total expenses for the next six months. The attitude should be "Since I'll be working without a guaranteed income stream, how will I survive for at least the next six months?" Use your checkbook, bank statement or credit/debit card statements to compile a list of all your projected expenses -- mortgage, taxes, utilities, insurance, food and recreation. If your spouse has a secure job, their take-home pay can be used to reduce the amount of savings you need. If you don't have the ready cash to survive at least six months, you'd be wise to postpone starting your business until you have the necessary funds.

Startup Funds. Beyond providing a nest egg for personal living, any new business also needs enough capital to survive six months to one year of business. Because it usually takes some time for a new enterprise to attract enough business to ensure a secure cash flow, having enough ready cash is critical. Operating expenses include salaries, wages, rent, utilities, supplies, advertising and perhaps bank and interest payments. Sources of these funds are usually loans from banks or individuals and accumulated personal savings or loans against your life insurance policy if you have one. You do not want to put your home at risk with a home equity loan nor do you want to run up high-interest credit card debt or dip into money in your retirement portfolio, which you'll need for your future.

A Good Credit Rating. The financial demands on a new contracting company can be enormous. Not only do employees expect to receive their wages every week or two, suppliers expect to be paid every month, possibly even within ten days. Clients, on the other hand, often don't see an urgency to pay immediately upon completion of the work. A key ingredient to success is earning a good credit rating so your suppliers will allow you to establish charge accounts with them and send you a bill once a month for the items you purchased. A good credit rating will also allow you to purchase vehicles and equipment and borrow the funds from your bank.

Management expertise

Contractors must be able to manage the activities and turmoil that often surround them on a daily basis. A workplace is a dynamic community of people with varying backgrounds. While it's true that a company is much like a family, it's also an individual business. Often business decisions conflict with personal feelings; good managers must be able to separate emotion from hard reality.

Managing people is a true art. People have their own personalities that are sometimes in conflict with one another. However, because they work for the same organization, they must be able to work together for a common goal. As a contractor-owner, it's up to you to promote a work environment in which people focus at the task at hand and keep their personal opinions on outside matters, especially politics and religion, to themselves.

Successful business owners must have excellent communication skills. Time, money and reputation can be lost by owners who don't communicate clearly with both employees and clients. Many clients have preconceived ideas about what a contractor should do; often they don't read contracts and proposals carefully enough to really understand what they're getting. Usually, they don't understand blueprints; sometimes, they have a vision from a photograph in a home improvement magazine. It's critical that a contractor-owner have the ability to clearly explain the services they offer and exactly what they propose to do for the client.

Owners must also be able to accurately communicate with employees. Because projects are often changed and adjusted midstream, good communication between the owner and the foreman is needed for the project to proceed accurately and on time. In addition, two-dimensional drawings are sometimes difficult to translate into the three-dimensional world. The contractor must not only communicate what must be done with accurate and legible drawings but also be able to explain verbally what the drawings mean.

The most important communication between clients and contractors are the specifics of each project, and they must be confirmed, reconfirmed and signed off on. Communication must therefore be very clear with each and every person working on the project. Emails and texts must be simple and to the point, and there needs to be a response confirming that such an email or text was received and acknowledged. You also want a paper trail and/or electronic trail, on all important communications, especially when changes are requested and agreed upon.

Entrepreneur Staff

Entrepreneur Staff


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