How to Start a Basement Remodeling Business

If you enjoy transforming an indoor space into something new and better, think about becoming a professional basement remodeler. This business opportunity enables you to complete entire projects from start to finish and see the benefits of your work firsthand. Remodeling experts turn basic cellars into additional living space or separate apartments.

Ready to form your LLC? Check out the Top LLC Formation Services.

Learn how to start your own Basement Remodeling Business and whether it is the right fit for you.


Start a basement remodeling business by following these 10 steps:

You have found the perfect business idea, and now you are ready to take the next step. There is more to starting a business than just registering it with the state. We have put together this simple guide to starting your basement remodeling business. These steps will ensure that your new business is well planned out, registered properly and legally compliant.

Check out our How to Start a Business page.

STEP 1: Plan your business

A clear plan is essential for success as an entrepreneur. It will help you map out the specifics of your business and discover some unknowns. A few important topics to consider are:

Luckily we have done a lot of this research for you.

What are the costs involved in opening a basement remodeling business?

If you decide to earn a remodeling certificate, this may cost around $850 to $1,250. You'll have to buy tools, protective gear, and other equipment. Tools cost considerably less if you wait for a sale and buy them in large sets. Remodelers spend up to $400 on state licensing fees. Unless you already own a suitable vehicle, you will need a commercial vehicle. Remodeling professionals frequently prefer vans. Consider buying a model with a service body since they have storage compartments for supplies and tools. A new van with this feature may sell for $45,000 to $65,000.

What are the ongoing expenses for a basement remodeling business?

This work involves many risks, so you'll face relatively high insurance costs. Both professional and general liability coverage prove desirable. The premiums add up to around $1,600 per year. You're likely to need workers' compensation and commercial vehicle coverage as well. Consider insuring your equipment; insuring equipment could potentially save you money and is an  affordable policy that normally costs under $200 per year. Other expenses include auto maintenance, supplies, marketing, storage, and wages.

Who is the target market?

Homeowners may turn to basement remodelers when they desire more living space and lack the land or money needed for an addition. Survey data reveals that millenials remodel cellars more often than anyone else. Many of these individuals have only owned one home. Some budget-conscious clients might want to complete a portion of the work on their own, supply the materials, or only partially finish the basement. These projects are less desirable, but they can help fill your schedule during the slower months.

How does a basement remodeling business make money?

Contractors charge homeowners for labor and materials. They usually aim to earn a profit in both areas. Basement remodelers tend to become busiest in the spring; work slows down by autumn.

How much can you charge customers?

HomeAdvisor reports that homeowners usually pay around $11,000 to $30,000 for this service. The exact cost depends on the square footage, materials, and features. For example, adding a bathroom substantially increases the expense. A homeowner will probably spend over $50,000 to create an apartment with an entry door, kitchen, and adequate plumbing.

How much profit can a basement remodeling business make?

The National Association of Home Builders reports a 5.2% net profit margin and a gross margin of just over 30% for remodeling. These average figures may differ depending on your business location, size, and practices.

How can you make your business more profitable?

Carefully calculate all direct and overhead expenses when offering quotes. Some contractors have lost money because they didn't take every cost into account. Keep records of all related purchases like equipment, newspaper ads, and license fees. Most business-related expenses remain tax deductible even when they're not essential.

  • Vehicle-related costs may provide your biggest tax deduction. Always make a note of the distances traveled in a commercial vehicle.
  • Subcontractors often cost less than employees, but it's important to ensure they have the appropriate licenses, insurance, and training.
  • Tasks that require more materials and less labor tend to yield greater profits. Prioritize clients with projects of this type.

What will you name your business?

Choosing the right name is very important. Read our detailed guide on how to name your business. We recommend checking if the business name you choose is available as a web domain and securing it early so no one else can take it.

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STEP 2: Form a legal entity

The most common business structure types are the sole proprietorship, partnership, limited liability company (LLC), and corporation.

Establishing a legal business entity such as an LLC or corporation protects you from being held personally liable if your basement remodeling business is sued.

Form Your LLC

Read our Guide to Form Your Own LLC

Have a Professional Service Form your LLC for You

Two such reliable services:

You can start an LLC yourself and pay only the minimal state LLC costs or hire one of the Best LLC Services for a small, additional fee.

Recommended: You will need to elect a registered agent for your LLC. LLC formation packages usually include a free year of registered agent services. You can choose to hire a registered agent or act as your own.

STEP 3: Register for taxes

You will need to register for a variety of state and federal taxes before you can open for business.

In order to register for taxes you will need to apply for an EIN. It's really easy and free!

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You can acquire your EIN for free through the IRS website, via fax, or by mail. If you would like to learn more about EINs and how they can benefit your LLC, read our article, What is an EIN?.

Learn how to get an EIN in our What is an EIN guide or find your existing EIN using our EIN lookup guide.

Small Business Taxes

Depending on which business structure you choose, you might have different options for how your business will be taxed. For example, some LLCs could benefit from being taxed as an S corporation (S corp).

You can learn more about small business taxes in these guides:

There are specific state taxes that might apply to your business. Learn more about state sales tax and franchise taxes in our state sales tax guides.

STEP 4: Open a business bank account & credit card

Using dedicated business banking and credit accounts is essential for personal asset protection.

When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your business is sued. In business law, this is referred to as piercing your corporate veil.

Additionally, learning how to build business credit can help you get credit cards and other financing in your business's name (instead of yours), better interest rates, higher lines of credit, and more.

Open a business bank account

  • This separates your personal assets from your company's assets, which is necessary for personal asset protection.
  • It also makes accounting and tax filing easier.
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Recommended: Read our Best Banks for Small Business review to find the best national bank, credit union, business-loan friendly banks, one with many brick-and-mortar locations, and more.

Open net-30 accounts

When it comes to establishing your business credit, net-30 vendors are considered the way to go. The term "net-30," which is popular among vendors, refers to a business credit arrangement where the company pays the vendor within 30 days of receiving goods or services.

Net-30 credit terms are often used for businesses that need to obtain inventory quickly but do not have the cash on hand.

Besides establishing business relationships with vendors, net-30 credit accounts get reported to the major business credit bureaus (Dun & Bradstreet, Experian Business, and Equifax Business Credit). This is how businesses build business credit so they can qualify for credit cards and other lines of credit.

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Recommended: Read our guide on the best net-30 vendors so you can start building business credit now, so you never have to worry about cash flow in the future. Keep in mind that poor cash flow is the #1 reason businesses fail!

Get a business credit card

  • This helps you separate personal and business expenses by putting your business' expenses all in one place.
  • It also builds your company's credit history, which can be useful to raise money and investment later on.

STEP 5: Set up business accounting

Recording your various expenses and sources of income is critical to understanding the financial performance of your business. Keeping accurate and detailed accounts also greatly simplifies your annual tax filing.

STEP 6: Obtain necessary permits and licenses

Failure to acquire necessary permits and licenses can result in hefty fines, or even cause your business to be shut down.

STEP 7: Get business insurance

Just as with licenses and permits, your business needs insurance in order to operate safely and lawfully. Business Insurance protects your company’s financial wellbeing in the event of a covered loss.

There are several types of insurance policies created for different types of businesses with different risks. If you’re unsure of the types of risks that your business may face, begin with General Liability Insurance. This is the most common coverage that small businesses need, so it’s a great place to start for your business.

Learn more about General Liability Insurance.

Another notable insurance policy that many businesses need is Workers’ Compensation Insurance. If your business will have employees, it’s a good chance that your state will require you to carry Workers' Compensation Coverage.

STEP 8: Define your brand

Your brand is what your company stands for, as well as how your business is perceived by the public. A strong brand will help your business stand out from competitors.

If you aren't feeling confident about designing your small business logo, then check out our Design Guides for Beginners, we'll give you helpful tips and advice for creating the best unique logo for your business.
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Recommended: Get a logo using Truic's free logo Generator no email or sign up required, or use a Premium Logo Maker.

How to promote & market a basement remodeling business

Many remodelers advertise themselves with yard signs, postcards, websites, and local newspaper ads. Social media networks like Twitter and Pinterest may provide effective and free promotion. Be sure to use plenty of images. Talk about specific uses for finished basements and give examples. You can post interesting cellar remodeling ideas on social media. Highlight the benefits of hiring a professional rather than launching a DIY project. For instance, an expert has the knowledge and equipment needed to prevent serious moisture problems that could render a finished basement unusable.

How to keep customers coming back

Tell potential clients about your experience, training, and references. If possible, show before and after pictures of a successful project. You could also provide an online video or slideshow. Emphasize the benefits rather than just listing features. A client might earn money by creating a home office or renting out an apartment. Discuss home resale values as well.

It's vital to achieve high customer satisfaction rates, so you'll benefit from positive reviews and recommendations. Retention is a less important aspect of this business unless a client owns multiple buildings or you offer other services. If you enjoy working with a specific customer, you could provide a coupon that reduces the cost of a future project.

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Still unsure about what kind of business you want to start? Check out the latest Small Business Trends to help inspire you.

STEP 9: Create your business website

After defining your brand and creating your logo the next step is to create a website for your business.

While creating a website is an essential step, some may fear that it’s out of their reach because they don’t have any website-building experience. While this may have been a reasonable fear back in 2015, web technology has seen huge advancements in the past few years that makes the lives of small business owners much simpler.

Here are the main reasons why you shouldn’t delay building your website:

  • All legitimate businesses have websites - full stop. The size or industry of your business does not matter when it comes to getting your business online.
  • Social media accounts like Facebook pages or LinkedIn business profiles are not a replacement for a business website that you own.
  • Website builder tools like the GoDaddy Website Builder have made creating a basic website extremely simple. You don’t need to hire a web developer or designer to create a website that you can be proud of.

Using our website building guides, the process will be simple and painless and shouldn’t take you any longer than 2-3 hours to complete.

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Recommended: Get started today using our recommended website builder or check out our review of the Best Website Builders.

Other popular website builders are: WordPress, WIX, Weebly, Squarespace, and Shopify.

STEP 10: Set up your business phone system

Getting a phone set up for your business is one of the best ways to help keep your personal life and business life separate and private. That’s not the only benefit; it also helps you make your business more automated, gives your business legitimacy, and makes it easier for potential customers to find and contact you.

There are many services available to entrepreneurs who want to set up a business phone system. We’ve reviewed the top companies and rated them based on price, features, and ease of use.

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Recommended: Find the best phone system for your business; check out our review of the Best Business Phone Systems 2021.

Start A Basement Remodeling Business In Your State

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Select your state below for an in-depth guide on completing each of these steps in your home state.

Is this Business Right For You?

Perhaps you spend a lot of time working on projects in the basement. A future remodeler probably likes to fix or upgrade things without help from professionals. While you need the ability to work independently, you should also excel at cooperating with others and choosing suitable partners. Your business may prosper if you're ambitious and don't mind messy work. A willingness to keep learning and adapting to new trends can help you succeed in the long run.

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Want to know if you are cut out to be an entrepreneur?

Take our Entrepreneurship Quiz to find out!

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What happens during a typical day at a basement remodeling business?

You'll speak to potential clients, travel locally, inspect cellars, and supply detailed estimates. If a customer decides to start a project, the next step is to acquire permits and materials. Remodeling tasks range from retrofitting stairs to installing insulation, drywall, and fixtures.

What are some skills and experiences that will help you build a successful basement remodeling business?

Any type of renovation work, such as painting, laying floor tiles, or installing built-in cabinets, can be helpful to this practice. You can get started by remodeling your own cellar. This will create a sample of your work and help attract your first clients. Plumbing, heating, or electrical skills are valuable but not essential. You could gain experience as a contractor's assistant or apprentice. Certain universities offer online and hands-on courses.

What is the growth potential for a basement remodeling business?

This service continued to gain popularity in 2020. Some firms gradually add more staff and vehicles so that they can handle numerous projects. Most firms concentrate on serving locals, and they don't expand elsewhere. Nonetheless, it's feasible to open multiple offices. Matrix Basement Systems has two locations that enable the company to serve clients across a large geographical area, including Detroit and Chicago. You could also set up a franchise. For an example of a basement finishing franchise, read about the Owens Corning program.

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Take the Next Step

Find a business mentor

One of the greatest resources an entrepreneur can have is quality mentorship. As you start planning your business, connect with a free business resource near you to get the help you need.

Having a support network in place to turn to during tough times is a major factor of success for new business owners.

Learn from other business owners

Want to learn more about starting a business from entrepreneurs themselves? Visit Startup Savant’s startup founder series to gain entrepreneurial insights, lessons, and advice from founders themselves.

Resources to Help Women in Business

There are many resources out there specifically for women entrepreneurs. We’ve gathered necessary and useful information to help you succeed both professionally and personally:

  • Funding
  • Events
  • Guides
  • Support

If you’re a woman looking for some guidance in entrepreneurship, check out this great new series Women in Business created by the women of our partner Startup Savant.

What are some insider tips for jump starting a basement remodeling business?

Don't use the same supplies and techniques that you would employ elsewhere in a home. Buy mold-resistant materials; remember to avoid paper-faced products. Putting spacers beneath drywall will reduce moisture issues by stopping it from touching the concrete. A subfloor between the flooring and concrete also proves beneficial.

Offer comprehensive solutions that prevent moisture problems and ensure long-term satisfaction. You may also need to perform some outdoor work. Examples of solutions to moisture problems may include lengthening the gutter downspouts, installing a French drain, and/or completing a grading project if it's necessary to keep water out of the cellar.

How and when to build a team

You're unlikely to have all of the skills necessary for a major remodeling effort, so you'll probably need employees and/or subcontractors. Screen them thoroughly; careful selection is crucial to the success of a project and the safety of everyone involved. Wages differ depending on a person's area of expertise. Laborers earn about $14 per hour while finish carpenters get paid $23 on average, according to PayScale.

Next Steps

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