How to Become a General Contractor

by Emily Beach; Updated September 26, 2017
Portrait of hard working building contractor

General contractors are the firms hired to manage and oversee the construction of a building. Historically, general contracting firms self-performed much of their own work. For instance, the general contractor might have a concrete team, an electrical and mechanical crew, and a group of skilled carpenters on staff to complete everything from drywall to door and hardware installation. These days, the role of the general contractor has changed. General contractors generally are responsible for lining up and managing subcontractors to complete each phase of the building's construction. Here, we will give you the steps to follow to start you own general contracting company.

Items you will need

  • Experience in the construction industry
  • Source of capital
  • Knowledge of local subcontractors and suppliers
  • Business plan
Step 1

Know your trade. If you're interested in starting a general contracting company, you must first work for one and see what kind of issues these types of companies face. Depending on your work history, it can take anywhere from one to five years to get a simple overview of the general contracting process. Watch how the company you're working for operates and decide what ideas you can take with you and which you want to do differently.

Step 2

Build relationships. While you're working in the industry, you must focus on building relationships with clients, suppliers and architects. The main key to achieving strong relationships in the general contracting world is to deliver what you say you will on time and at a high level of quality. Every phase of a construction process revolves around a schedule, and every delay can set off a domino effect that can cost thousands or even millions. If you keep your promises and help your clients keep their schedules, people will remember you and want to work with you.

Step 3

Create a business plan. Most word processing programs have simple business plan templates available. Once you start your business plan, you'll begin to see areas where your plan is lacking, and you can decide how to fix these areas early on. You will need a business plan to secure financing at a later stage.

Step 4

Take care of the legal stuff. Obtain any required business licenses from your state. General contracting firms may require specific additional licenses or permits, so be sure to check. During this stage, you should also set up your federal and state tax accounts, including income, sales and workers' compensation.

Step 5

Get insured. General contracting companies are required to carry millions of dollars worth of liability, workers' compensation and vehicle insurance. Meet with an insurance company well before you secure any work to determine how much these insurance policies will cost.

Step 6

Get financing. This is the most important step in forming a successful construction company. You'll need to apply for business loans, set up credit accounts and make sure you have access to any savings well before you actually need the money. The commercial construction industry is notoriously slow to pay, meaning that you should be able to finance the full value of any projects you take on, including all labor, materials, overhead and payments to subcontractors for up to 90 days.

Step 7

Seek out clients. Here's where your good relationships in the industry will work for you. Start spreading the word about your new general contracting company to your previous clients and colleagues. If you've done quality work and kept your promises to people in the past, they will be willing to give you a chance to bid on any work they are involved in.

Step 8

Expand your business. Sign up for bid lists, visit local plan rooms and keep an eye on any projects that are coming up. Be proactive about going after available work. If you continue to perform quality work, word of mouth will spread and your general contracting company will be a success.

Tips

  • Join local trade groups. You will make many new contacts and get to know everything that's going on with construction in your area.

Warnings

  • Don't underestimate how much capital you'll need. The No. 1 reason businesses fail is that they fail to have enough cash available.

About the Author

Emily Beach works in the commercial construction industry in Maryland. She received her LEED accreditation from the U.S. Green Building Council in 2008 and is in the process of working towards an Architectural Hardware Consultant certification from the Door and Hardware Institute. She received a bachelor's degree in economics and management from Goucher College in Towson, Maryland.

Photo Credits

  • gpointstudio/iStock/Getty Images