It’s difficult to grow a business if no one knows you’re in business, so spreading the word is crucial to your success. Many contractors forget that advertising is so important and simply assume that word will travel on its own. Unfortunately, it usually does travel exceptionally fast if it’s something negative. Otherwise, people are pleased with the results and it might just slip off their radar until someone specifically asks who remodeled their kitchen or built the awesome deck in the backyard. Considering this, you need to make sure that you take proactive measures to promote yourself in a positive and reliable way. In today’s society, there are endless means of reaching a customer, but some are a bit more suited to one need or another. So we will discuss a tried-and-true method that is a viable option for almost every kind of contractor or service provider.

Many things are handled in the digital world nowadays, and if you have a cell phone and a computer, you undoubtedly get email ads and text notifications from stores. While this is great for a products such as clothing or food, you probably aren’t going to send out a text telling customers that they can show that message to receive a free tub-caulking. The first consideration in any advertising situation is the audience; how best to reach the specific people you are targeting. Obviously in your line of work, you are targeting home owners, and perhaps property management companies, who are able to pay for the work (hopefully). This means it will probably be a slightly older customer you are trying to reach so an actual piece of mail is a great way to reach that demographic. Less likely to rely solely on digital media, an older customer base still reliably checks their mail and reads their newspaper, and gives them greater credibility than other forms of advertising, so a direct-mail piece is a great option to reach these folks. (And by older, we aren’t referring to 98-years-old, but 30ish and above. Old enough to own a home and be responsible about paying the bills and general upkeep).

Chances are you’ve gotten many direct-mail pieces over your lifetime promoting various services and causes. Any responsible person will check their mail and at least flip through the pieces to make sure they aren’t missing a check or, more often, a bill. This is your opportunity to grab their attention. Bright colors and bold text are essential to stand out in a sea of papers so consider a neon shade (safety yellow, anyone?) or a solid red or other striking color. Make the first words they see catch their eyes with suggestive questions or statements like “Did you know that little roof leak could land you in the hospital?” or play up the time of year with “That tax refund would look great as a new and improved patio, kitchen, etc etc…” Coupons and offers are always a great way to give customers incentive to use your services. Consider offering a discount on a specific service, a package deal for “Spring Cleaning”, or promoting that you always provide free estimates.

This probably seems a bit intimidating to someone who has never done a formal advertisement, but another perk to using a direct-mail option is that you’ll have help from whomever you select for the service. Most newspapers offer a direct-mail option which is a great way to be a bright-and-early reminder of their need for a reliable contractor. Using this option, and depending on the local paper in your area, you can generally select the day of the week you’d like to be included in the paper as well as a specific area or zip code for delivery. Generally you will pay more to be in a weekend edition, particularly the Sunday paper, than a weekday press, but there are pros and cons to each. Work with the advertising consultant at the paper to determine what options are available to you and would best suit your needs. Many places will offer bulk discounts for inserting a higher number of mailers and/or having a larger number printed up. Even if you only plan to distribute a few thousand, it might be worthwhile to have more printed initially to achieve a lower “per-item” cost, and then you could run them a few additional times in the paper at a later date, or keep them to personally hand out at bids or with potential clients. There are many private services that also offer direct-mail, which would generally be delivered in the actual mail. A quick internet search will help you identify many of these or if you already get direct mail pieces, look at the fine print for information about the publisher and how to contact them. Keep in mind that most places will have a minimum requirement, either in dollars spent or in total number of pieces printed or distributed, so don’t think that you can only send out 50 at a time.

As a good advertising consultant will tell you, frequency and repetition are essential for print-advertising success. While this probably seems like a sales tactic, it truly is better to budget your money to send a smaller number of ads, several times than thousands of ads, one time. It’s just like studying for a test, the more often you see something, the more of a presence it builds in your brain. Plus, even if your piece gets thrown away or overlooked the first time, the more chances you present to be seen, the greater your odds of, well, being seen. You also create a kind of rapport with people when you’re persistent. How many of us have declined a product or service the first time but when the same salesman keeps asking, you eventually feel more inclined to listen because they obviously have something to say that they feel is worth working at to get you to listen. People start to think “This is the third time I’ve gotten this. I wonder what it is.”

Many people forget how essential advertising is to their success and cut it first when the budget gets lean. It is somewhat of a catch-22 situation when funds are limited but you can’t increase those funds without people wanting your services, and they can’t want your services if they don’t know they are available so plan wisely to accommodate for advertising and promotion.

When launching your own business there are many decisions to make ranging from minute details to “make-or-break” enormous ones. Will you have an office location? Will you hire an accountant or bookkeeper? Will you have red or blue ink on your business card? Will you work only on weekdays? Will you target residential or commercial customers? The list goes on and on. While some of these decisions will have a small impact on the future of your enterprise, reaching a conclusion about your business model and ownership structure is one of the biggest and most important decisions you’ll have to make.

Maybe you’ve totally got these decisions in the bag and know exactly how you’ll move forward, but for many entrepreneurs this process can seem confusing and overwhelming. Not to be misleading, these are huge decisions with many little details woven throughout, but it’s not nearly as intimidating as you might think if you just have a little background knowledge. Luckily for you that’s exactly what you’ll be armed with after reading this post.

Sole Proprietorship

As opposed to many of the other terms and options, the name here kind of explains itself. If you plan on being “where the buck stops” then this is the structure for you. As owner, boss, manager, foreman, or whatever term (or combination thereof) you’ll call yourself, you won’t have to debate decisions with anyone or worry about their standards and performance, because if you find yourself displeased with someone’s actions or performance, you’ll have the ability to dismiss them without repercussions. That sounds like an easy way to avoid conflict and it can definitely have its advantages, but on the flip side, don’t fool yourself into thinking it’s always easy to be flying solo. What happens if you’re sick or injured for an extended period? There is no one there to automatically pick up the reigns and move forward. What happens if you’re facing a major decision? While you don’t have to answer to anyone else, you also don’t have anyone else to share in the weight of responsibility. Maybe you’re really good at pouring footers and driving nails but your people skills are a bit rusty at best…as sole proprietor you’ll still have to be nice to the occasional customer-from-hell and deal with trying to convince people to select you during the bid or initial consult. In many instances, contractors simply have no need or desire to move past sole proprietorship, but do be aware that being the boss isn’t always easy; that even if you’re on vacation, you’re still technically on call and that you are responsible for making sure all the bills get paid. However, there is undoubtedly a huge sense of pride and accomplishment to say you built a business from the ground up, on your own.

Partnership

This name is also pretty indicative of what you could expect as you’d obviously be working with one or more partners. When compared to a sole proprietorship, everything about a partnership is pretty much the exact opposite, for the good and for the bad. There are a few specialty types of partnerships, but for the purpose of this article we’ll assume you’re only interested in a general partnership, which basically means you would be required to share profits, decisions, and ownership with at least one other person, which can lead to disputes and confrontations when you inevitably butt heads over a tough decision (surely contractors aren’t ever stubborn though, right?).  Many times partnerships are formed when one person has the start-up funds but doesn’t want to actually handle the day-to-day work, while the other person (or people) have the ability but not the money to begin. This might be your scenario or you might be working with a spouse, friend, or sibling in completely equal roles. It is comforting to know that there is someone else’s shoulders on which burdens can rest, but partnerships have the potential to end very badly if someone becomes upset or feels they have been cheated. For you and your partner(s) protection, spending a few extra dollars to have a legal partnership agreement detailed, defined, and drawn up by an attorney is an irreplaceable investment.  You would like to think that a handshake would be enough but, unfortunately, as with marriage, no one sets out in a partnership hoping or expecting it to end miserably, but they sometimes do and it will be to the benefit of all parties involved if you have a clearly drawn-out plan of what the responsibilities and rights are.

LLC

Don’t be intimidated by these initials, they simply stand for “limited liability corporation”. Obviously the sound of being limited on your liability seems like a win-win, but there is a little more to it than that.  The biggest advantage of operating under a LLC is that you, as a person, are protected, because you are legally viewed as a separate entity from your business, whereas in a sole proprietorship or partnership you are seen as belonging in and of each other, meaning that if your business defaults on a loan or goes bankrupt, the bank or financiers can legally assume your personal assets, essentially meaning you could lose your home to pay off your business debts. This obviously is a huge benefit should something go wrong or end up less profitable than hoped for, however, all of these extensive legal details mean exactly that: there are more extensive legal details. LLC’s are more complicated to establish and will require more formal processes as there will be more paperwork to fill out and file, plus extra precautions will have to be taken to make sure that personal details, business, and money are kept entirely separate from business ones. (That whole “being protected” thing becomes much less reliable if a bank or court can’t see where your personal money ends and the business money begins.) It is also a much more formal organization where there can be partnership or ownership interests, which can be sold. This obviously means more money available for operating costs but increases the complications when dealing with legal matters or disputes about decisions. LLC’s will provide some tax advantages, though, as you will only be responsible for paying taxes on the portion of your income as opposed to having to pay the total amount of tax on profit generated by the entire business when you are a sole proprietor.

Corporations

There are two main types of corporations in the U.S. today, an “s-corp” and a “c-corp”. The most common type of corporation in our market is the c-corp, which provides similar benefits of an LLC in that you are shielded as a person from any judgments or rulings levied against your business. Corporations are obviously much more complicated business structures as they have shareholders and generally stocks for sale. This obviously isn’t a simple business model that would apply to “Joe’s Home Repairs” but if you’ve been in business for years and have created an impressive network of contacts and investors, you might consider moving into this business model. There are two major differences between the “s” and the “c” type corporations. First, a c-corp is usually larger, having an unlimited number of shareholders, although there are regulations on how many you can have before having to file with the SEC, the nice folks who regulate our stock exchange. In an s-corp, which is usually a smaller business, you can only have 100 shareholders and one class of stock. The second major difference is how you are viewed for taxing. Many businesses choose to be an s-corp because they can avoid the dreaded “double taxing” of a c-corp. In an s-corp you would only be taxed on the income you personally gain from the business, while shareholders also have income and losses through the business, meaning the burden of taxation is distributed among yourself and anyone else who has a stake in the business. In a c-corp however, profits are taxed when earned and then are taxed again when passed along to shareholders in the form of dividends, where shareholders cannot claim any corporate losses to offset the tax burden, as opposed to an s-corp.  Corporations do have more power and credibility as they are usually such large business entities and have such huge earning potential. Obviously these business structures are not for the faint of heart or the first-timer, but it’s also useful to be armed with a better understanding of the business world around you and to know what you could potentially grow into.

So you’ve decided to make the leap and after all these years of being “Mr. Fixer-upper” you realize it’s time to let those handy-man skills start truly paying for themselves. Plus, you think the idea of having a business card with your name as owner is pretty darn awesome. So you’re actually going to start, or legalize, your business and you’re really excited, but what exactly do you need to do to make that happen? Well there are lots of steps and things to consider but first and foremost, you need to lay some groundwork for the future. It’s hard to find a new destination with absolutely no directions, map or GPS and setting out on a business venture is very much like this. If you are hoping to end up at the intersection of profit and success, you need to know the exact way to get there and an invaluable guide to reaching those goals is a business plan. A business plan in no way will guarantee that you’ll never have any issues and that what you think is a great idea now won’t change in 6 months or 6 years down the road but it’s a great place to outline the direction you’d like to see your business take plus can help you think through some issues on the front-end that could be much more problematic if they arise unexpectedly.

Luckily for you, our buddy “Pete” is in the process of writing up a business plan and has agreed to let us peek over his shoulder as he goes through the steps. Pete has been doing little side jobs here and there for years but is ready to be his own boss and step up his earning potential. Pete has successfully completed the steps of becoming a licensed general contractor and is now ready to start building his home-remodeling business from the ground-up.

Initial things to consider…

Pete will be undertaking this venture by himself, but it’s important to know at the very beginning how your ownership will be structured. Will you have a partner or co-owner? Will you be the “sole proprietor” listed on all formal documents but have a spouse, sibling, or friend who you share all of the major decisions and responsibilities with “off-the-books”? Obviously if more than one owner/partner is involved, the major issues are usually responsibility, power and division of earnings. It’s understood that sometimes relationships just don’t work out, whether personal or business, so the decisions you make today can obviously change tomorrow, but making it perfectly clear who does what and who owns what at the beginning of a business’s life can greatly reduce the chances of issues or upset later.

It might seem petty or even funny, but another major decision is the name of your business. Maybe you want something catchy or witty, maybe you just want something simple, or maybe you’ll simply use your name, which is what Pete will be doing. Either way, make sure this is something you’re comfortable saying many times a day and being represented by. Not to be pessimistic but also consider that if you will be sharing the ownership with another person and both of your names are involved in the business’s name/title, if there were an issue someday, it could mean lots of extra legwork to get their name removed, plus the added embarrassment of having to potentially change logos, cards, materials, or simply explain it to customers. This is obviously a worst-case scenario but bear these things in mind.

Pete has been squirreling away money for several years with this possibility in mind and has a nice chunk of change to purchase a few extra tools and a designated work truck. If however, you need a little help from a bank, investor, or well-to-do friend a business plan is a crucial tool to proving your case for funds. Banks will almost always require a well-written and thought-out business plan to help them decide whether or not your business is credible, you truly understand the risks and necessary steps of operating it, and to determine your abilities as a manager. Any private investor or financier who is responsible and of good business-mind will also want to see your detailed plans for the future, because honestly, who enjoys loaning money to a friend or family-member and then being taken-advantage of or not getting repaid?

Designing a detailed plan…

Since these crucial steps are out of the way, Pete is ready to dig into finer details of business planning. Since he is much more comfortable with blueprints than business plans, he has asked a friend with years of banking experience to help him draft and finalize his plan. There are plenty of online guides and templates available if you’d like to complete this yourself or you could ask a friend or even attorney. There is no specific formula for the length or detail of a business plan but you would do yourself a favor to really think it through and cover all aspects possible, as opposed to sketching out a few lines of notes on the back of a napkin.  There are also several organizations available to help small businesses or entrepreneurs as they start a business. The U.S. Small Business Administration would obviously be the biggest and most credible of these, with lots of online resources and guidance to local assistance, but there might be other smaller, more locally-based organizations in your area as well if you simply check into it. Don’t be afraid to ask for help, especially from people who are willing to help and have first-hand experience with what you’re going through.

Pete’s banking buddy explained to him that most business plans will deal with the short-term future, generally planning for the upcoming 3-5 years. The overall goals of a business plan are to outline what the company will do, how they will do it, who they will be competing against, how to advertise or promote their business, and the structure or organization of the business itself. A well designed business plan will have easy to read and understand sections that address all of these issues in an organized manner. The Small Business Administration has very helpful resources that explain easy ways to design, organize, and explain your content, as well as an actual step-by-step tool that helps draft the plan itself.

The essentials…

Whether you plan to have a very formal plan with details down to the type of nails you prefer and where you’ll buy them or a broader overview, there are a few topics that rank a bit higher on the priority list of things to consider and outline.  As previously mentioned, management and organization are crucial to discuss and plan for. Pete will be making all decisions and handling all the day-to-day responsibilities himself, so this makes things a bit easier for him. If you will be working with someone else make sure the roles and responsibilities are clearly defined for your benefit, as well as that of the other partner and the understanding of any investors. No one will probably have to remind you that making money is of utmost importance so another crucial consideration is income, profit potential, and how much you might need to get your business off the ground. Banks in particular will be highly interested in your reasoning for how much you need to borrow and how you’ll manage it once it’s loaned. They also will want to know more detail about what areas or markets you’ll serve, how you’ll set yourself apart from and compete with other businesses of a similar nature, and the projections you can offer for future income and growth potential.

Pete was also encouraged to consider how he’ll “get the word out” about his business and services. Many old-school craftsmen might overlook this consideration but it’s important to remember that a business with no customers can’t succeed, no matter how great their product or services. While designing your business plan, it’s important to think on these things and outline what methods of advertising will be best for you. Obviously in contracting, there’s an undeniable benefit to word-of-mouth referrals so encourage any clients to speak highly of you and your skills when you complete a job to their satisfaction (you might even consider a referral bonus or discount.) Will you have a website featuring pictures of your handiwork? Will you advertise in local papers or publications? Are you or will you become involved in local business organizations such as the Better Business Bureau, the Chamber of Commerce, or a builders organization? These are all important things to consider and detail in your plan.

After a couple of revisions, Pete and his friend feel confident in the business plan they have produced. Consider printing and putting together a couple of copies, one for more easier access and frequent reference, and one to be kept in a safe or protected area. Consider including permits, contracts, licenses, and other official documents in this copy so you’ll always have a central location for relevant documents. You might also need or be required to leave a copy with an investor or bank so plan for that as well.

It might seem a bit tedious at the beginning and if you are like Pete, you might have grumbled a bit about having to spend that much time thinking and writing, but the most successful business people realize that planning and preparation greatly increase your chances of success, no matter the industry. It’s guaranteed you’ll thank yourself later if you take the little extra time and attention required to hammer down the details before you start hammering down the nails.

Maybe you started out as the household handyman and slowly developed a knack for plumbing or maybe you apprenticed as an electrician from your teens, but either way you have honed your skills to that of a true craftsman and realize it’s time to step up your game. Whether you are or are considering becoming a general contractor or a specialized trade, getting your contractor’s license can substantially increase your trustworthiness to prospective clients, not to mention boosting your business potential from weekend spending money to an impressive annual income. This isn’t something to pursue lightly though as the licensure process requires a great amount of dedication, studying, and follow-through, as well as meeting certain stipulations and paying for the testing and/or certifications. Hopefully this article can help shed some light on a somewhat-intimidating process and help you feel better prepared to don your thinking cap (or hardhat).

Do I need a license?

First and foremost, what are your business aspirations? Are you content to be a weekend warrior who slaps up a few coats of paint or fixes the elderly neighbor’s leaking pipes? If so, you’re probably fine just to run a side business. If however, you want to focus on your trade as your primary source of income or increase your business reputation as a solid and reliable company to do business with, a contractor’s license can prove invaluable. Most states have certain stipulations as to what actually requires licensure in regards to the dollar amount of the job at hand. Some states identify certain project costs as a requirement for licensure while other states have classifications of responsibilities and the extensiveness of the project to deem what license would be required. As with most things you can find plenty of companies online that are there to help “ensure” you can pass the tests but the most reliable place to find out the ground rules are with the actual state you hope to be licensed with. All states have a government appointed board or commission of some sort who are in charge of licensure requirements, testing, and certification. It’s fairly easy to find these with a simply internet search based upon your state or the state in which you hope to be certified. Make sure you fully understand any and all fine print in regards to your actual trade. For example, many states have a set of requirements to be a general contractor but slightly different terms for a subcontractor trade (such as masonry, electrical, plumbing, etc.) or to be a construction manager. Some offer “umbrella” licenses, some require independent certifications. It might seem tiring to read all of the legal wording and boring government documents, but being completely armed with the knowledge of what you need to do and how to do it is crucial to your success in the licensure process.

How do I get a license?

Again, this will vary hugely from state to state, but all states have a very set process which you’ll have to follow in regards to your testing and approval for licensure. This information can also be found usually found with the standards and requirements for applying so as you search out the fine print of what is required to be licensed, also make notes on this process as well. If you know of or are friends with a reputable contractor or someone who recently received their license, they could also be very helpful in guiding you in the process. Back to those internet companies…There are numerous institutions and websites who can help you prepare for the testing you’ll have to complete. Some are solely internet based, some mail out materials, and some offer classroom instruction. You definitely don’t want to go take the test and be totally unprepared so finding some sort of study help and guidance is highly advisable. However, make sure that you are dealing with a reliable source and not “Joe’s Contractor License and Cosmo School”. Obviously there are lots of businesses that would love for you to hand over your credit card information so they can help you prepare for the test and then they prepare to max out your card, so be aware. In general though, you’ll be able to tell the reputable businesses by their standards and the materials they can help you study with. It is definitely not a requirement to use an outside study-source to be able to pass the tests, but if you are the kind of person who just knows how to get jobs done and isn’t so familiar with formal rules and regulations, this could really be an asset in helping you prepare. If you aren’t interested in an outside source, consider again asking a friend or mentor for direction as well as looking on your governing state’s website for study and reference materials. Most libraries and bookstores will have general resources as well.
There will be certain applications, paperwork, order of procedure, and deadlines for each state so make sure, again, that you know the requirements and what papers need to go where and when. The actual testing might take place only a few times a year or in only one or limited locations, so make sure you plan accordingly for these details. Also, make sure that you have your legal details worked out and decided on as well, as you’ll have to apply as a sole proprietor, LLC, etc. and in some cases might have to provide more detailed plans or information on your business’s current standings or future projections.

What benefit will I get from a license?

As mentioned before, if you really want to break into the big-time projects you’ll be required to have a license so that the state knows you are truly competent and clients have a certain standard to expect from your work. You will also be eligible to bid on government, municipal, industrial and private contracts which, we all know, can make serious money or provide long-term on-going work. You’ll enjoy a more respected professional “renown” as people will find reassurance in your abilities knowing that you have met and surpassed the state’s standards as opposed to someone who can only claim their abilities. Also, most companies that offer insurance and bonding look more favorably on a licensed contractor since they can rest assured that the state or governing board has weeded out the most dangerous and incompetent applicants. You also will be provided protection from penalties and restrictions, as unlicensed contractors caught performing jobs that should be done only by someone licensed can be fined, forbidden to continue working, or a combination of the two. Not that most of us don’t bend a rule now and again, but it pays to be on the “up-and-up” in this line of work. Also, consumers aren’t actually required to pay someone who isn’t state-licensed, plus there are certain benefits and assistances provided to contractors who might need help with small business plans, finding insurance, or need mediation to settle a dispute with a client.

I’m licensed, now what?

Start making money! Seriously, enjoy your accomplishment and use it to boost your business as you can now move onto more complicated and lucrative projects. Do not abuse the privilege because not only will your reputation be forever tarnished but if you misuse or misrepresent yourself and/or your business it can definitely end in jail time. In some states, if you bid on a project, collect payment in partial or in full and fail to complete the project within the parameters or the contract or agreement, it can be considered a felony. Also, make sure you are well aware of what will be required to keep your license up to date. Just because you’ve been a well-known contractor for 15 years doesn’t mean that the state will just assume you’re going to continue operating. Different states have different amounts of time before licensure will expire and many states will mail out a renewal reminder or application a few months before expiration, however it isn’t the state’s responsibility to make sure you stay current so be sure to set a reminder or mark your calendar well in advance to renew any and all licenses as needed. Obviously in our digital world, many states have online applications and/or renewals so you might be able to renew your license without ever leaving home. A contractors license might seem intimidating to earn, but it is truly an investment in your future and definitely boosts your chances of success so do whatever is necessary to successfully complete the licensure requirements, to keep the license current, and above all, to maintain your reputation as a contractor.