If you’re like most home improvement professionals these days then you’re constantly trying to hunt down new work, and this means getting involved in some sort of system for generating contractor leads.  Now there may be some among you who take great pride in your marketing skills and think that resorting to paying for leads is somehow a demonstration of failure, but this simply isn’t true.  No matter how skilled you are with advertising or how much you spend on flyers or newspaper ads, the truth of the matter is that there is a good chunk of the public that you simply will never reach with traditional advertising, and this is where paying for good leads comes into play.  Let’s take a look at some different methods of getting new business and how they compare.

The Best Leads For Contractors Come From Previous Customers

Getting customers is a numbers game - but you'll find that some contractor leads convert better than others depending on their origin.

In my experience the leads that cost me the least and convert the most often are those that come from previous customers.  Now you might say that this is technically a “referral” and not a “lead”, but instead of arguing semantics with you I’ll just say that this method for getting new business kicks butt.  Why? Because of trust.  People trust their neighbors, friends, and family members and will take their advice when it comes to contractor referrals, often times without so much as getting a second or third price estimate.  Do good work for someone and you have an “in” with their whole network of people for years to come.  If you’re smart you’ll make it worth their while, too.  You could set up a formal referral plan where you pay a certain amount per referral or you could just have a general understanding with someone that for every lead or job they send you you’ll mail them a gift card to their favorite store or restaurant.  You might be surprised how much more people will talk up your business for a measly $25 gift card to Chili’s.

The Next Best Contractor Leads Come From Other Contractors

I can’t tell you how many times I’ve been finishing up a job at someone’s home and they approach me to ask if I can recommend any contractors for other projects they have around the house.  I’ll almost always have a name or two to give them for their particular need, and for whatever reason these recommendations tend to be given great weight by homeowners.  I guess people think that since I’m a contractor I’ll have the “inside scoop” on who the qualified players are in my city for other industries, and they probably also know that I’m not going to recommend someone who does poor work because it would reflect poorly on me.

How does this apply to you?  Simple.  Network with as many other contractors and service providers as possible and let them know that you will pay for leads.  Imagine how much work you would have if you told every painting contractor in your city (most big cities have hundreds if not thousands of them) that you’d pay them $200 for every roofing lead they sent your way that resulted in a new roof. You would literally be inundated with new jobs.  And the beauty of this system is that you only pay when actual work results, unlike traditional advertising where there’s no guarantee that $1000 spent on mailers will result in even one new job.

You could even take this a step further and create a formal city-wide network of contractors who pay a yearly fee for membership.  Each member would understand that they are only to recommend contractors who are paying members of the group.  Your network would include the city’s best painter, the city’s best plumber, the city’s best electrician, the city’s best remodeling company, etc.  You could call it the “Elite Home Services Network of (enter city name here)” or something similar.  The point is that if you’re not working out lead generating relationships with the thousands of other contractors in your region then you’re missing out on a HUGE untapped reservoir of new business.

Internet Contractor Leads Can Pay Off Huge If Done Correctly

If you’ve spent any amount of time on this site then you know how much I like using the web to expose my business to consumers.  There are as many ways to spread the word on the internet as there are grains of sand in the Sahara, and you should be aware that some of them will be amazingly successful while others will be an utter waste of time and money.  Ultimately, a lot of it will come down to trial and error (create a spreadsheet to track how much each converting lead is costing you on average per service and slowly weed out the non-performers), but I can give you a general break-down of my own personal views.

• Get to know Google.  They currently have total domination in the search space (I think something like every 7 or 8 out of 10 searches done on the net is done with Google).  Make sure you’ve created a listing in their Local Business Center (free) so that your business comes up in the maps section for local search results.  Also get a professionally designed website and either hire someone to get it optimized for the search engines or teach yourself how to do this.  If you can achieve a #1 ranking in Google’s organic listing for your local keywords then you can generate a TON of business.  These rankings are great because once you’ve got them you’re set to get unlimited free construction leads in the future (unless some other SEO-savvy business owner comes along and knocks you off your perch).  Also consider using Google Adwords to advertise your business in the ad sections of search results (these are the ads you see along the top and in the sidebar when you do a search).  This will cost you some dough but in my experience is definitely worth every penny.
• Get listed with Angie’s List and other free contractor review sites.  Okay, so you can’t list yourself on Angie’s List but if you do good work it’s just a matter of time before one of your happy customers posts a positive review on their site.  Once you’re in you should see a remarkable uptick in calls as a result.  These leads are so effective and convert so often because they’re based on that magic word that we talked about before: TRUST.  Best of all, they’re totally free!
• Finally, there are loads of lead generation services on the internet for contractors that will promise you everything under the sun.  Many of them are worthwhile while others could be a disappointment, but again just keep track of your cost-per-lead and weed out the duds.  I’ve heard good things about ServiceMagic, for example, but the results will differ for different industries and regions.  You’ll find that some of these services attract homeowners that are merely “tire-kickers” while others will find you more serious prospects, and it really just comes down to trying a few out and seeing what works.  If you’ve shelled out $500 to one service for leads and only landed one or two small projects then dump it and move on to the next one.  I think it would be a mistake to completely write these services off, however.

Swallow Your Pride And Shell Out The Money For Leads

I hate to harp on this but some guys (and gals) have a hard time paying for leads because they think it somehow reflects badly on either their marketing abilities or their trade skills.  If you’re one of these people then you need to get over it.  I don’t care how good a painter you are or how perfect a tilesetter you’ve become, your talents as a contractor will only take your business so far.  At some point you just need to take the plunge and open yourself up to the idea of dropping a little bit of cash in exchange for a lot more projects.

If you’re like a lot of this site’s visitors then you’re here because you want to learn how to become a contractor, but you’re also unsure if this is the best time to be starting a business.  With all of the current economic problems you might be thinking that this is a terrible time to become a full-time contractor.  You might be scared that after dumping money and time into getting your little company off the ground that it will fall flat on its face because everyone is telling you that consumer spending is down, bank lending is down, and the end of the world is near.

My response to these doubts?  Simple.  Stop making excuses and get going already!

Many people have dreams of starting their own contracting or service business but in reality few of them ever actually break free from wage slavery and become business owners.  Why?  “Because it’s too hard.”  “It’s too complicated.”  It’s too time-consuming.  It’s too risky.  It’s too scary.  I’m not smart enough.  The economy is tanking.  I might fail.  I might not have a consistent paycheck.  Blah.  Blah.  Blah.

If you want to do it then do it.  Timing should be the least of your concerns.  But just for the record, this could actually be a great time to start your small contracting business on the side and see what happens.  Why?  Because most people are so fearful right now to make any investments in themselves or their businesses that it has created some wide-open opportunities for the rest of us to make inroads in our local markets.  While the other would-be entrepreneurs in your community are cowering in fear and unwilling to part with their so-called “secure” 9-5 job, you’ll be out there getting work, building a brand, and forming professional relationships.  The result is that a few years from now when the economy is booming again you’ll already have the foundation in place for record growth while everyone else is just getting started.

Be a contrarian and reap the rewards down the road.  Those who are most successful in the long-run are often the ones who become aggressive when others are running for the hills, whether it be in real estate, stocks, or entrepreneurship.

Just get going.

I’ve gone over this a little before, but the volume of questions I receive on this topic make it clear to me that I need to revisit the question of how to make a lot of money.  I guess because this site’s title has the word “rich” in it, it attracts all sorts of people on the internet, and that’s fine.  I don’t have the hangups about money that some others do, and I don’t think that having a lot of money is inherently evil.  As long as your growth as a person is accelerating at the same rate as your bank account, then you’re A-OK in my book.  After all, it’s what you do with your wealth that really matters.

There is no shortage of people who want to learn how to make a lot of money, but few of them have the work ethic necessary to actually achieve true financial freedom.

The problem, though, with attracting all types of cash-seekers to this site is that many of them seem to be looking for that quick hit that requires a minimal amount of effort.  Lots of people want to know how to get rich quickly or easily, but as those of us who have been around the block a time or two will attest, achieving wealth is almost never quick or easy.  There’s a reason why only a small percentage of people on this planet are absolutely loaded, and it’s that only a small percentage of us have both the desire and the enduring drive necessary to get there.  Newsflash: If you want to make a lot of money you have to work your butt off!  There is no easy way unless your last name is Hilton or Walton, and even those families spent decades and massive amounts of energy to get to ultra-wealth status.  Anybody that tells you otherwise is selling you something, and that something is a big, heaping, steaming pile of BS.

This is not to suggest that your contracting or service business will necessarily require decades to make you rich.  I’ve seen situations where a young small business owner worked extremely hard and became a millionaire within 5-6 years, but if you’re expecting to earn a six-figure income right off the bat remodeling kitchens and bathrooms then you’re in for some disappointment.  It will take time.  It will take sweat.  It will take sacrifice.  If you really want to learn how to make a lot of money then you better be prepared for battle.

There’s a Lance Armstrong quote that goes something like this: “Pain is temporary; losing is forever”.  Apologies to Lance if I got that wrong but I think the gist is evident.  There have been days in my business when everything that could go wrong did go wrong, when the deck seemed stacked against me, when all signals seemed to be that I needed to give up and go ask my old boss for my job back.  But, so far at least, in each of these instances I’ve been able to pull back from that edge by reminding myself that pain is temporary and losing is forever.  It is the decisions we make in these instances of doubt and confusion that ultimately separate the winners that make money from the losers that make excuses.  When the stuff hits the fan 95% of us will wither and retreat.  The other 5% will fight on with the knowledge that no matter how bad today is it will be a better tomorrow, not only because things are never as disastrous as they seem in the moment, but also because they know that the other 95% will have thrown in the towel.  The 5% consists of some ornery and stubborn folks, and if you want to make a lot of money with your own business you’ll have to be that way, too.

Okay, so let’s say you’ve got the work ethic and you understand that in order to make a ton of money you’re going to have to put in the time.  Next step: what kind of business to devote yourself to for the next several years or more.  I’ve gone over this in previous posts so I won’t rehash.  I suggest reading about making money with a simple service, getting rich via replication, and finding a profitable niche, just for starters.  Just know that unless you’re ready to scrap and bust your butt the rest is a moot point.  A tenacious business owner can make a go of it in the worst of industries while a limp noodle will have trouble growing a business even in the hottest fields.

Oh and, by the way, if you think that you can grow exponentially without spending at least a little money on the exploding opportunities that are available right now in small business web marketing then you are sorely mistaken.  Familiarize yourself with the leverage that the internet can offer or risk losing out on the huge percentage of consumers who no longer even use their phone book.  And gaining these skills will serve you in other capacities as well, because there are plenty of ways to make money online as a side-hustle to your full-time, remodeling business.

This post has sort of rambled on and I apologize to my regular readers for the sermon, as this is intended not so much for you but for the new folks who stumble in here expecting that I’m going to show them the “secrets” to making a lot of money without doing much work.  It was time for some brutal honesty.

So, a fair and kind heads-up to the newbies out there.  Send me an email demanding to know “how to make a lot of money fast” and expect that I will reply with a link to this post and probably nothing more.

I’ve put together a ton of information on this website to try to help the average guy (or gal) get his (or her) own contracting or service business going and thriving, but occasionally I’m asked basic questions that demonstrate to me that I need to go over more of the basics.  One question I get over and over again: “What exact steps do I have to take to actually become a contractor?”  These questions come from folks who usually already have a skill but have never owned a business before and are afraid that starting one would be too complicated or too risky.  It doesn’t have to be either.  Learning how to become a contractor is actually a rather straight-forward process.  Here’s a basic list for turning that dream into a reality (note that this list could be slightly different for your state):

1. Have the guts to go for it.  Either you can make excuses all day long not to start your own business or you can grow some courage and take the leap.  As for me, I worked at a dead-end job for years that offered no opportunities for advancement or growth.  I reached a point however, around my 30th birthday, when I realized that life was passing me by and I wanted something more.  I wanted to take a risk.  I wanted to be in a leadership role.  I wanted to experience the ups and downs of the American entrepreneurial experience by becoming a professional contractor.  Above all, I wanted to build something that was tangible and that I could be proud of.  So I went for it, and I’ve never once regretted the decision.  There have been highs and lows, good days and bad, but overall it’s been a terrific experience, and my only real regret is that I didn’t start sooner.  (Please make this transition in a smart and calculating way, my friends.  Unless you have mass cash reserves set aside, it’s a good idea to keep the day job and work your biz on the side until things really start rolling.  For more on this subject, please see my post about knowing when to quit your day job.)
2. Decide what kind of service to offer.  I think the most important part of this decision is making sure it’s something that you have at least some level of interest in.  Don’t become a contractor in a trade that you hate just because you “heard” that there’s good money in it, because you’ll burn out before the big money even starts to roll in.  You don’t have to love it, either, but it should be something you can tolerate long enough to get to that point when you can hire on laborers.  Ideally, your business should also involve something that you’re already skilled in.  Learning the ins and outs of a new trade is extremely time consuming, and time is money (you’ll have your hands full with administrative tasks, anyway).  If you still don’t know what to do, ask your family and friends for advice.  Often times those closest to us know our talents better than we do.  If you’re more of an organizer and a leader then you might want to focus your efforts on learning how to become a general contractor.
   
   

   Learning how to become a contractor is not difficult, but few people take all the necessary steps to ensure legitimacy and, ultimately, success.

3. Name your business.  Keep it short and memorable, but not hokey.  People shouldn’t laugh when you tell them the name of your business, nor should it be so convoluted that you have to repeat it five times before they get it.  Remember, your business is a brand, and you’ll be identified with it for the foreseeable future.  Make it a name to be proud of, and include the type of service you offer in the name if possible.  Check the website of your state’s Secretary of State to make sure the name is still available, then register it as a sole proprietorship, LLC, or corporation (among others).  My business is set up as an LLC but check with a lawyer to decide what’s best for your situation.  I’ve added a post that discusses setting up as an LLC versus an S Corp.
4. Apply for an EIN (Employer Identification Number).  If you are set up as a corporation or LLC then you need to do this even if you have no employees, and you can apply online here for free.  You’ll need this for things like opening a bank account, applying for a license, and filing a tax return.  If you are a sole proprietor then you are usually not required to have an EIN, but it may benefit you to have one anyway as it helps to protect your personal information and shape your image as a real pro with a legitimate business.
5. Apply for a service vendor’s license from your state.  This one came as a surprise to me back in the day when I was in the process of learning how to become a contractor, but it’s one of those red-tape steps that shouldn’t be overlooked.  Depending on your business and state this may or may not be necessary but it was for me.  Again, a simple google search should point you in the right direction on this one.  Most states now have a business gateway website that will walk you through a lot of this kind of stuff.
6. Open a business bank account.  This is easy.  I walked into my local bank, met with someone for about 15 minutes and it was done.  I walked out with a booklet of checks and received a debit card in the mail a week or two later.
7. Get insured.  Nothing says “amateur” like an uninsured contractor.  This will be a significant expense for you but well worth the cost when you consider how many potential customers will turn you away if you don’t have it.  Talk with a local agent to go over your particular situation and to make sure you’re fully covered for your services, vehicles, and equipment.  If you plan on hiring employees right off the bat, you’ll also need workers compensation coverage and probably an unemployment compensation tax account with your state’s department of job & family services(check with your state for more information).
8. Register with your state’s department of taxation if you’ll be collecting sales tax.  This is usually a pretty straight-forward process, and I pay collected sales taxes to my state on the internet once a month.
9. Make sure you take the necessary steps to become a licensed contractor, if the law requires it. My business did not require any sort of trade license, but obviously for people like electricians and plumbers this is a must-have.  In some states you’ll need a license even if you’re trying to learn how to become a general contractor.  Starting a legitimate contracting business means playing by the rules, and avoiding them will burn you eventually so take this one seriously.  It’s hard for me to be more specific about getting a license because every state handles it differently, but just Google it and you should have your answer.
10. Find a location.  Obviously it would be wise to start your business from home and then if growth justifies it look for an industrial space to rent or buy.  Many states also offer a department of development website with an online database of available commercial space.
11. Set up a business phone number.  Setting up a dedicated line for your business not only comes across as more professional but also usually gets you a complimentary listing in the phone book.  Try also to get a number which translates into an easy-to-remember “vanity” number.  For example, if you’re starting a roofing business see if they’ll find a number for you that ends in 7663 (which coordinates with the letters R-O-O-F).  It’s easier for a potential customer to remember 999-ROOF than 999-1928.  When I set ours up the rep at the phone company was very helpful with this and it was done in a matter of minutes.
12. Prepare for the accounting.  You can either hire this out or use software like Quickbooks.  I use Quickbooks and it’s a huge timesaver once you get the hang of it.  I know, I know, you want to become a contractor, not an accountant, but sometimes in the early stages you have to wear several hats.  It comes with the territory.  If you would rather just hand this stuff off to a pro then I recommend Randal DeHart at Fast Easy Accounting.
13. Learn about how to price your work.  This is a biggie.  The most common mistake I see with new contractors is that they don’t know what to charge their customers.  Usually this means that they don’t understand their cost structure, they don’t understand buyer psychology, and they don’t place a high enough value on their own time.  Result?  Epic failure.  Well, the good news is that there’s an easy button for that.  Check out my buddy Dan Perry’s guide to becoming a $100k Handyman (it’s applicable to any home services or remodeling business).  He’ll show you EXACTLY how to price your work for maximum profits.  Follow along as he shows you how he went from making $25 an hour to over $90 an hour with his business.
14. Get the word out.  Time to tell every person you know and meet about your cool new contracting business.  Have professionally designed construction business cards on you at all times.  Order postcards and have them direct mailed to wealthy suburbs in your city.  Most importantly, start a blog using my complete, step-by-step guide.  Our web efforts have been, by far, the single biggest factor in providing us with free construction leads and growing our business.  Web marketing is far more cost-effective than TV, radio, or print ads.  It’s still shocking to me just how few contractors bother to utilize the internet, but that’s a good thing for you because if you go that route you’ll have very little competition.  Also, start networking with other professionals in your city who are even remotely connected to the home improvement industry.  Check out Jonah’s great tutorial on how to get no-cost leads through realtors.

Now sit back and watch the money roll in.  Yeah, right!  Now the real work begins, but if you’ve made it this far you’re already ahead of the 99% of people out there who talk a good game but will never do what it really takes to get a business off the ground and running.  Please keep in mind that this is a generic list and that there could be additional steps and procedures in becoming a contractor that you’ll need to take depending on what state you live in, what your legal structure is, and how many other owners are involved.  Though I set up my business without the help of a lawyer, you’d be wise to consult one just to make sure all your bases are covered.

So now you know how to become a truly self-employed contractor.  It’s not hard.  You just need to do it.  Do you have it in you?  If you’ve read this far then I’m willing to bet that you do.