Starting a general contracting business is one of the most viable paths to building real wealth in the trades—but only if you set it up correctly from day one. Skip the legal and financial groundwork, and you'll spend years cleaning up messes instead of landing contracts. Here's exactly what you need to do.
Get Licensed and Insured First
Licensing requirements vary by state, but most require you to pass a contractor's exam, prove work experience (typically 3–5 years in the trades), and pay a licensing fee ranging from $50 to $500. States like California, Florida, and Texas have strict licensing boards with ongoing continuing education requirements.
Beyond licensing, you'll need:
- General liability insurance – minimum $1 million per occurrence is standard; most commercial clients require $2 million
- Workers' compensation – mandatory in most states the moment you hire your first employee
- Contractor's bond – typically $5,000 to $25,000, required in many jurisdictions to pull permits
Don't cut corners here. A single uninsured jobsite accident can end your business before it starts.
Set Up Your Business Structure
Register your business as an LLC or S-Corp rather than operating as a sole proprietor. An LLC gives you liability protection and costs between $50 and $500 to register depending on your state. An S-Corp can save you money on self-employment taxes once you're consistently making over $40,000–$50,000 in profit.
Open a dedicated business bank account, get an EIN from the IRS (it's free), and set up basic accounting software like QuickBooks or FreshBooks from the start. Mixing personal and business finances is one of the most common mistakes new contractors make.
Define Your Services and Niche
General contracting covers a huge range of work—residential remodels, commercial build-outs, new construction, tenant improvements. Trying to do everything at once is a recipe for thin margins and scattered reputation.
Pick one or two core services to lead with:
- Kitchen and bathroom remodels – high demand, repeat referrals, strong margins (typically 20–35%)
- Whole-home renovations – larger contracts, longer timelines, good for building long-term client relationships
- Commercial tenant improvements – often faster-paying clients, repeatable project types
- New residential construction – higher revenue per project but more capital-intensive
Define your geographic service area too. Dominating a 30-mile radius is far more profitable than spreading yourself thin across an entire metro.
Build Your Subcontractor Network
As a GC, your reputation rides on the people you hire. Build a reliable bench of subs before you bid your first major project. You'll need plumbers, electricians, HVAC techs, framers, drywall crews, and finish carpenters at minimum.
Vet every sub for their own license, insurance, and references. Get certificates of insurance on file before they set foot on any jobsite—your insurance company will expect it, and so will any serious client.
Price Your Work Properly
Underpricing kills more contracting businesses than lack of work ever does. A common framework:
- Calculate your direct job costs (materials + labor + subcontractors)
- Add your overhead (typically 15–25% of revenue for a small GC)
- Apply your profit margin (10–20% is a healthy target)
Use estimating software like BuilderTrend, CoConstruct, or even a well-built spreadsheet to track bids consistently. Track your actual costs against estimates on every project so you can sharpen your numbers over time.
Get Your First Clients
Referrals are the lifeblood of a new contracting business, but you can't wait for them to trickle in. Actively pursue work through:
- Real estate agents and property managers – they have constant renovation needs and can send repeat business
- Local architects and designers – a trusted GC relationship is gold for them
- Door-to-door in target neighborhoods – leave door hangers or postcards after a visible project
- Online presence – a simple website with project photos and Google Business Profile is non-negotiable
Listing your business on a marketplace like Mercoly puts your services in front of homeowners and commercial clients actively searching for contractors, giving you a steady stream of leads without relying entirely on word of mouth.
Systemize Early
The contractors who scale successfully treat their business like a system, not just a job. Build templates for:
- Contracts and change orders (use a construction attorney to draft these once)
- Client communication schedules
- Job site safety checklists
- Invoicing and payment terms (net 10 or net 15 is reasonable; avoid net 30 when you're starting out)
Even with a two-person operation, documentation protects you legally and makes growth possible.
The foundation you build in your first year will either carry you forward or hold you back—get licensed, get insured, price correctly, and start showing up where clients are already looking.