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Your remodeling business might be a one person show where you personally complete kitchen, bathroom, bedroom remodels or additions to homes and businesses. In another business model, you could serve as a general contractor and hire employees or subcontractors to help complete jobs in a more efficient manner.
Who is this business right for?
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 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.
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.
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 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 steps to start a remodeling business?
Once you're ready to start your remodeling business, follow these steps to ensure that your business is legally compliant and avoid wasting time and money as your business grows:
- Plan your business. A clear plan is essential for success as an entrepreneur. A few important topics to consider are your initial costs, your target market, and how long it will take you to break even.
- Form a legal entity. Establishing a legal business entity prevents you from being personally liable if your remodeling business is sued.
- Register for taxes. You will need to register for a variety of state and federal taxes before you can open for business.
- Open a business bank account. A dedicated checking account for your remodeling business keeps your finances organized and makes your business appear more professional to your customers.
- 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.
- 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.
- 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.
- 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.
- Establish a 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. Save 15% when you create a business website with Weebly.
Select your state below for an in-depth guide on completing each of these steps in your home state.
Where can I 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.
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 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.
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.
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.
Maintain Personal Asset Protection
Don’t think that just forming an LLC, or any other type of business, will save your personal assets in case of a lawsuit or other matter by itself.
When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your LLC is sued. In business law, this is referred to as piercing your corporate veil.
Two of the simplest steps that will protect your business, and yourself, are to:
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.
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.
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.
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.
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.