Learn how to be a successful general contractor with these 20 tips to help you grow your client base, earn a loyal following, and build a good reputation in your field.
Running a general contracting business can seem like a good way of becoming self-employed. However, building a successful business isn't always easy. An estimated 1 in 5 businesses fail in their first year. We're here to offer you some advice about how to be a successful general contractor and how to grow your business in a sustainable way that will set you up for long-term success.
What Is a General Contractor?
General contractors are individuals who can be hired to complete various jobs. A family (or business) may choose to hire a general contractor to do some plumbing or carpentry work for them when they're renovating their kitchen, rather than going to a company that sells kitchens and having it do all the work using its employees.
General contractors play a vital role in the economy, and their jobs can be quite complex. While on the surface it may appear that they simply do the job they're hired for, there's a lot of work that goes on in the background, such as ensuring all the tools and materials are available to do the job and that health and safety regulations are complied with.
What Training Do You Need to Be a General Contractor?
The training you need to become a general contractor will depend on the areas of work you'd like to pursue. Some states have licensing requirements in place for general contractors who'll be working on larger jobs, but not all states have this requirement. In general, some industry experience is a good idea, and a bachelor's degree in construction or a related field would give you a head start over the competition.
Some training in business management and marketing may be useful for general contractors who are looking to get started in the industry and won't be outsourcing those tasks during the early stages of the business.
The Benefits of Becoming a General Contractor
Becoming a general contractor appeals to many people because of the freedom it offers compared to being an employee for a larger business. General contractors have more freedom to set their hours, choose which jobs they work on, and set their prices.
Many general contractors go on to manage teams and may eventually step away from the job site and focus on the business side of things. This can be a positive from a longevity point of view. Not everyone wants to still be working with their hands as they approach retirement age.
Being a general contractor does come with some extra responsibilities that employed tradespeople don't have to think about, but the additional control and flexibility can make that feel worthwhile.
20 Tips on How to Be a Successful General Contractor
Consider the following 20 tips on how to be a successful general contractor and learn how to set yourself up for success in the contracting business.
1. Use Your Network
Many people enter the general contracting business after having first worked as a tradesperson for a larger company. Take advantage of this experience and reach out to people you've worked with. If you have a good relationship with your former employer, they may be willing to pass you smaller jobs that aren't within their area of responsibility. Former colleagues who've already gone their own way may have advice about suppliers to use or could join you to create a referral network where your plumbing friends pass you carpentry clients and vice-versa. Never underestimate the power of networking.
2. Build Your Reputation
Reputation can make or break any small business, and it's particularly important for tradespeople. Consider your reputation in everything you do. The way you deal with clients from that first inquiry call all the way up to invoicing matters. If you hire people, make sure they understand that they represent you and your business when they're working on a job site or even out and about wearing overalls with your logo on them. Prioritize staff who are polite, personable, and attentive. You can teach trade skills to someone who's eager to learn more easily than you can teach a good attitude.
3. Pay Attention to Detail
Attention to detail is something that matters in every aspect of running a business, from ordering the materials required for a job to completing your company accounts. Get into the habit of checking every measurement twice, re-reading your quotes, and proofreading your marketing materials. It's likely your trade mentor will have already told you these things, but when you're tired or busy, it's easy for good habits to fall by the wayside.
Don't let yourself become one of those cautionary tales of how a simple miscalculation led to a six-figure error. Write up working processes for yourself and any employees you have to serve as a safeguard against small but costly mistakes.
4. Join Trade Organizations
Industry organizations such as Associated General Contractors are well worth the membership fee. They offer networking opportunities and can provide advice and assistance as you scale your business. In addition, membership in trade organizations offers an air of legitimacy to your business, which can be helpful when you're advertising to new customers.
5. Learn the Business Side of Things
You may have been drawn to the trades because you don't want to do a desk job, but if you want your contracting business to succeed, learning about the financial side of things as well as marketing and customer service is essential.
As your business grows, you can look to outsource many of these tasks, but the knowledge you can gain from completing a few free courses offered by the Small Business Administration will stand you in good stead in the early years.
6. Invest in Marketing
Word of mouth is rarely enough for a small business to stay viable. Investing in marketing and lead generation will help you keep a steady flow of customers and build up brand recognition in your area. If you're not good at graphic design or writing sales copy, consider hiring someone to do this for you.
7. Politeness Costs Nothing
Competing with large businesses in your area that have flashy marketing campaigns and huge teams may seem impossible. However, prospective clients don't necessarily care about those things. When choosing a contractor, they'll consider the quote along with things like how quickly you answered your email, whether you listened to what they said, and whether you were polite. These are things that cost nothing and can help you stand out from the crowd more than any sales strategy could.
8. Be Adaptable
Even if you're trying to carve out a specific niche such as plumbing, it still pays to be adaptable. If you're working on a job and your customer has a minor issue that you have the skills (and license) to fix, such as some cracked plaster or a loose joint, go above and beyond and fix it for them. This gesture saves the customer time compared to hiring a second contractor and could net you a loyal client for life, along with a five-star review.
9. Look for a Mentor
Seek out someone more experienced than you who's willing to mentor you. This could be a retired tradesperson, someone who's running a similar contracting business in a different area, or even a successful businessperson in a slightly different industry. Having a knowledgeable person to talk to who can help you achieve your goals is invaluable.
10. Keep an Eye on Your Cash Flow
Cash flow problems can be fatal to any business. Large payments at the end of a job are nice to have but won't help you if you don't have the capital to keep going until the job is finished. Draw up a cash flow forecast so you can see what your income and expenses are likely to be each month. If you notice you may be low on funds at certain times of the year, look for ways to fix that, such as taking on smaller jobs or getting milestone payments from clients on larger jobs.
11. Invest in Your Staff
Try to build a good team around you. Look for people who have skills you lack and can help you take on some of the toughest contractor jobs. Think long-term and hire people who you'd feel comfortable allowing on a job site without you so the business will be sustainable when you're ready to take a step back.
12. Treat Your Staff Well
Hiring new employees takes time and money, both during the hiring process and during the time it takes to onboard them and get them working at full productivity. Treating your staff well reduces employee turnover and saves you money on future hiring costs. In addition, happy employees are more likely to be well-motivated and do a good job when they're on-site. It's a win-win.
13. Be Willing to Turn Down Work
In the early days, the idea of turning down work may seem inconceivable because you need the income. However, taking on work that's outside of your skill set, or for a client that's setting off alarm bells in other ways, isn't a good idea. If you're worried that a client won't pay their bills, don't put yourself in a position where they could owe you money. If a client seems impossible to please, don't risk ending up with negative reviews. It's perfectly acceptable to tell a client your book is full or you don't feel you'd be able to complete a job to their satisfaction.
14. Outsource When Necessary
As your business grows, you may find you're unable to keep up with demand by yourself. When that happens, consider outsourcing certain parts of your jobs. You may still be the face of the business and do the most demanding or complex tasks but have reliable contractors that you outsource smaller jobs to or bring in to assist you on larger jobs. If you regularly take on jobs that require a skill set you don't have, find another contractor you can refer people to or outsource that work for yourself.
15. Beware of Burnout
As a small business owner, you may feel pressure to work every day, even if you're tired or sick. After all, you only get paid for the jobs you do. This attitude can quickly lead to burnout. Set your prices to factor in the fact you don't get paid holidays or sick pay. Schedule jobs carefully to give yourself some time off to rest. If you're feeling exhausted, look at outsourcing some jobs or hiring someone to take on some of the load. This will help you avoid burnout and stay physically and mentally healthy.
16. It's the Small Things That Can Break a Business
When time or money is tight, it can be tempting to cut corners, but this can easily backfire. Skimping on components or rushing a job may seem like it will save you some money or avoid an angry customer when job costs run over, but any poor-quality workmanship will eventually come to light. If you communicate with a customer about delays or unexpected issues with a job, they may be disappointed, but they're likely to respect your honesty. If you rush a job instead, they're more likely to be angry when they discover issues, and you won't have the opportunity to fix them.
Angry customers leave bad reviews and complain to their friends and family. Recovering from negative word of mouth can be difficult, so try to avoid this. Don't skimp, even on the little things.
17. Reputation Management Pays Off
Even the most diligent business owners sometimes make mistakes, and it's not possible to please everyone. Bad reviews are a fact of life. Fortunately, most consumers understand this, and they don't judge a business purely on bad reviews. They also look at the context of those reviews and how the company responds to them. Learn about reputation management and try to communicate with your customers to build a good reputation online.
18. Don't Chase Growth You Aren't Ready For
Long-term growth is a good idea, but trying to grow too aggressively could harm your reputation. Only take on the jobs you can handle and plan your finances carefully if you're thinking of hiring new people. Try to find the balance between expanding and keeping the same customer-centric, quality-focused work ethic that made you successful in the first place.
19. Paperwork Matters
Many contractors struggle because they aren't good at managing their finances or their work schedules. Even if you hate paperwork (or computers), it's important to find a filing system that works for you. Keep careful records so you can offer good customer service and your accountant doesn't flinch when you hand them your records to complete your tax return.
20. Never Stop Learning
If you want to serve your customers well, it's vital to keep up with the latest developments in your chosen industry. Invest in your professional development and make an effort to learn about new techniques, tools, and technologies that will help you do a better job.
There's More to Contracting Than You Think!
General contractors need to wear a lot of different hats. It's a hard industry to succeed in, but those who are polite, hardworking, and willing to learn and grow can make it work and will reap the rewards of being a freelance contractor.
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