Start a remodeling business by following these 9 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 step guide to starting your remodeling business. These steps will ensure that your new business is well planned out, registered properly and legally compliant.
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:
- What are the startup and ongoing costs?
- Who is your target market?
- How long it will take you to break even?
- What will you name your business?
Luckily we have done a lot of this research for you.
What are the costs involved in opening a remodeling business?
If you are simply offering up your own skills and time as a part-time remodeler, the start-up cost will be around $50,000 to $75,000 as you will need a complete set of tools, a vehicle for transporting tools and supplies, and the proper licensing and insurance in order to operate in your state and locality. If you are looking to enter the business world offering major renovation services, expect to have start-up capital of $250,000 to $500,000 as you'll need to be able to purchase your first few orders of materials and hire staff before your customer pays you for the completed job.
What are the ongoing expenses for a remodeling business?
You will need to maintain accounts with material suppliers, pay your crews on a regular basis, and maintain vehicles and tools. Fortunately, your office space can be fairly minimal.
Who is the target market?
Home and business owners who are seeking to have their property professionally renovated and are willing to pay a fair price for labor and materials. Large businesses that need renovating may have more space, allowing you to charge more for your work.
How does a remodeling business make money?
Your remodeling business generates income by charging your customers for labor and materials for their renovation. You are responsible for providing your own tools, as part of your trade. However paint, hardware, lumber, flooring, and other supplies are purchased by you at wholesale prices and then you charge your customer for them at a premium price. Your hourly labor costs will be determined by level of expertise, the type of job that is being completed, and local competitive rates.
How much can you charge customers?
Your rates will vary depending on size and complexity of the job. Rates vary from $45/hr to $85/hr and can be lower or higher. You will want to complete an extensive competitive comparison to ensure your client is getting a good value. The average renovation project costs between $3,000 and $15,000.
How much profit can a remodeling business make?
The typical markup on materials is 15%. Income for a one-man company can be around $20,000 a year working part-time while a large contractor with multiple crews can see income in the seven figure range when they complete multiple large jobs over the year.
How can you make your business more profitable?
Ensuring quality work that completely satisfies your customer is the number one means of generating more business, and therefore additional profit. You will need to ensure the quality control and customer service are always of top priority for your successful remodeling business.
What will you name your business?
Choosing the right name is very important. 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.
After registering a domain name, consider setting up a professional email account (@yourcompany.com). Google's G Suite offers a business email service that comes with other useful tools, including word processing, spreadsheets, and more. Try it for free
STEP 2: Form a legal entity
Establishing a legal business entity such as an LLC prevents you from being personally liable if your remodeling business is sued. There are many business structures to choose from including: Corporations, LLC's, and DBA's.
You should also consider using a registered agent service to help protect your privacy and stay compliant.
For most small businesses forming an LLC is a great option, but if you still want to weigh all your options check our our article, What Structure Should I Choose for My Business?
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!
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?.
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.
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.
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.
State & Local Business Licensing Requirements
Certain state permits and licenses may be needed to operate a remodeling business. Learn more about licensing requirements in your state by visiting SBA’s reference to state licenses and permits.
Most businesses are required to collect sales tax on the goods or services they provide. To learn more about how sales tax will affect your business, read our article, Sales Tax for Small Businesses.
Remodeling businesses should require clients to sign a services agreement before starting a new project. This agreement should clarify client expectations and minimize risk of legal disputes by setting out payment terms and conditions, service level expectations, and intellectual property ownership. Here is an example of one such services agreement.
STEP 7: Get Business Insurance
Insurance is highly recommended for all business owners. If you hire employees, workers compensation insurance may be a legal requirement in your state.
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.
How to promote & market a remodeling business
Direct Mail campaigns can help your name appear in front of local homeowners. Ask to sponsor a do-it-yourself workshop at your local big box store. Make sure to add your company name on the side of all the vehicles that appear at the job site and where you order supplies. Consider joining groups such as the National Association of Home Builders or the National Association of the Remodeling Industry to add their advertising power to your own.
Recommended: Get started with local advertising for your business with a $300 credit from Yelp.
How to keep customers coming back
Potential clients love to see an example of the work they might hire you to complete. Position signs in front of homes that you are working on or have recently completed. Ask satisfied customers if you can add pictures of their new kitchen to your website and social media. Encourage customer feedback, as their word will carry far more weight than a simple advertisement. Be willing to return to the jobsite to complete touch ups for up to a year, as that happy customer is the most likely individual who will hire you again. Always provide professionally prepared contracts and business cards and make sure your phones are answered in a businesslike manner.
STEP 9: Establish your Web Presence
A business website allows customers to learn more about your company and the products or services you offer. You can also use social media to attract new clients or customers.
Start A Remodeling Business In Your State
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?
A remodeling business is a great investment for the person who has a passion for home improvement, with extensive knowledge of multiple construction skills and enjoys a background of business and accounting. Dedication to completing work thoroughly with close attention to detail while providing superior customer service is also required.
What happens during a typical day at a remodeling business?
Whether you simply manage the business or are swinging a hammer with the crew, you might be expected to:
- Participate in demolition, installation of flooring, walls, and cabinetry
- Source supplies and materials for the job site
- Maintain open communication channels with the customer, updating them on progress
- Schedule your reliable crews and subcontractors in a time-efficient manner
- Maintain proper licensing to operate in your state
- Train new crew members to maintain your high standards
- Complete punch lists after you finish a job
- Establish relationships with tool and materials vendors/suppliers
- Maintain payroll records/pay your crews on a timely basis
- Collect payment from customers
- Create contracts for customer approval
- Promote your business to generate new jobs for the future
What are some skills and experiences that will help you build a successful remodeling business?
Your remodeling business will find greater success when you have a wide range of skills under your belt as the owner/operator. These may include, but are not limited to:
- Solid understanding and experience in construction techniques with regards to kitchen, bathrooms, siding, windows, additions, and flooring
- Appreciation and knowledge of quality materials and their fair pricing structure
- Good accounting knowledge to maintain accurate records for accounts payable/receivable and payroll requirements
- Excellent time management that lines up additional crews to complete the next phase of construction without waiting
- Good ability to establish and maintain positive relationships with customers by providing clear and honest communication throughout the remodel
- Ability to identify experienced crew members you are hiring as subcontractors or as employees
- Knowledge of safety standards, permits, and licenses required to operate a safe workplace
What is the growth potential for a remodeling business?
Some individuals work on a part-time basis by themselves completing renovations for local homeowners. However, with the right business model in place you can be responsible for finishing interiors of apartment buildings, entire subdivisions, and large commercial spaces. The quality of your work and responsiveness of service will build your reputation, helping to land larger contracts able to expand your small business into a major general contracting business.
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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.
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:
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 remodeling business?
You will need to network with other contractors and potential customers. Attend the next Home Show and rent a booth as an exhibitor to get your name out and about. Ask to leave your flyer and business contact at local hardware/DIY stores and reach out to local plumbers, electricians, and even general contractors who may need help on their next big job. Word of mouth is often responsible for finding your next customer, so you'll need to work hard to build a positive reputation.
How and when to build a team
As soon as you cannot keep up with demand, start putting out feelers for qualified carpenters and installers. Do not hesitate to complete background checks and ask for references from verifiable sources.