You’ve got all the know-how when it comes to handling power tools and building the blueprints for a stand-out home renovation project. But when it comes to constructing the foundation of your business as a general and licensed contractor, you might be in need of some direction.
In this article, you’ll find information on how to become a licensed contractor. You’ll learn the different types of licenses you can acquire, how the requirements for each vary from state to state, and what you can do to successfully build your business from the ground up.
Let’s start by reviewing the difference between licensed and unlicensed contractors.
#1 The advantages of being licensed
The difference between licensed and unlicensed contractors may appear quite simple on the surface: one holds a state license, and the other does not. While these two categories of professionals may, in fact, offer many of the same services, the presence or absence of a state contractor’s license means different things for each:
- Contract limits for unlicensed contractors– Unlicensed contractors may only be able to take on contracts below a particular value. Different states set the bar at different amounts, but many contractors will need to obtain a license in order to bid on projects exceeding a certain threshold.
- Project freedom and higher earnings for licensed contractors– Licensed contractors also have the freedom to participate in an array of projects within their particular category of work. Because they are not limited by the total project value, they will likely have a higher earning potential in the long term than unlicensed contractors.
- More legal protection for licensed contractors – Licensed contractors have more business expenses for things like liability insurance and surety bonds, they also have more legal protection than unlicensed contractors. This makes them less susceptible to costly fines should a project go awry.
While forgoing a license may make it faster to start your own business, getting licensed will benefit you in the long run. Becoming a licensed contractor will help gain peoples’ trust, grow your business, and give you access to more opportunities.
#2 Pick your direction
If you decide that taking the licensed contractor route makes the most sense for you and your business goals, you’ll then need to narrow the path a bit further. You’ll want to choose the right contractor license based on your experience, expertise, and how you can best market yourself within the industry.
Consider the following primary licensing categories and decide which one your skills best fall into:
- General building contractor – As a general building contractor, you’re responsible for all things related to common repairs, maintenance, and construction. You’ve got a versatile skill set that can be applied in a variety of jobs in both the residential and commercial sectors. In this role, you would be in charge of everything from overseeing and inspecting projects to managing a team of subcontractors and handling payroll.
- General engineering contractor – In order to qualify for this type of license, you’ll need to be able to tap into specific knowledge in the field of engineering, whether it be mechanical, civil, or electrical. You’ll be skilled in navigating and overseeing projects related to drainage and irrigation, sewage disposal, chemical plants, earthmoving, transportation, and more.
- Specialty contractor – As a specialty contractor, you’ll take on work either directly from a project owner or from a general contractor. Also known as a subcontractor or a Class C contractor, you’re an experienced, specialized expert in your particular niche whether it be in roofing, flooring, HVAC, or welding.
Once you settle on the type of license you’d like to obtain, the next step is to research the licensing process, as it varies by state.
#3 Research the state-specific requirements
Whether you’re pursuing a license as a general building contractor, specialty contractor, or general engineering contractor, you’ll need to nail down the details when it comes to the area you plan to serve. Not all requirements are the same across the board, so by doing location-specific research, you’ll have a better idea of your next steps.
Here are a few of the variables you’ll need to consider when planning out your licensing trajectory:
- Education – The type of degree you currently hold might not be absolutely essential to obtain a license as a contractor, but it could help. Most states will require candidates to have at least a high school diploma in order to qualify for licensure, whereas others will prefer you to hold a bachelor’s degree in a related field.
- Experience – In lieu of a higher degree, some states may be open to accepting construction-related experience in order to fulfill the necessary requirements. Candidates applying for licensure in the state of Georgia, for example, can pursue one of two pathways. They must either have obtained a degree from a four-year college or university or have completed some college-level courses alongside field experience for a total of four years.
- Exam – Part of the licensing process in each state will sometimes require passing a qualifying exam. A business and law exam may be the only prerequisite, in some cases, while others will ask candidates to complete an additional, trade-specific exam in fields such as electrical, engineering, plumbing, or HVAC.
Take advantage of online resources to find out more about what the process might look like in your state. Keep in mind, too, that some states’ licensing procedures operate on a city or county level, so be sure to contact the nearby government offices to learn more about local regulations.
#4 Factor in costs associated with obtaining a license
As you consider how to become an independent contractor, you’ll need to evaluate the process through a financial lens as well. Starting your business will come with its own fair share of expenses. But when it comes to the specifics of obtaining your license, you’ll want to be aware of a few costs attached to this particular phase of business development.
Be sure you’ve factored certain expenses into your budget for things like:
- Application fees
- Training
- Exam fees
- Licensing fees
- Insurance
In order to ensure the protection of your customers and the public, you’ll also have to invest in a surety bond. Separate from general liability insurance, this bond is a way of committing to ethical business practices and certifying that each project will be carried out in a way that is compliant with local regulations. This step of the process will need to be completed before submitting your application.
#5 Develop a plan to obtain new clients
Once you’ve obtained your new contractor license, the next step is attracting new customers to your small business. With your license, you’ll have access to a number of possibilities for new projects and clients. But how can you go about establishing and maintaining these relationships in order to sustain your business over time?
Tap into a few of the following strategies to get your foot in the door and start acquiring new clients in your area:
- Get active on social media - Whether you’re starting your business from scratch or looking to expand your current clientele, it makes sense to use the tools that are available to you for free. Thanks to social media, you can increase brand awareness and boost engagement with your current audience at no cost to you. Consider the strategy implemented by T.Scherber, a Minnesota-based specialty contractor, for example. They use their social media page to capture all the details on recent projects, educate their community on how they can benefit from their excavation and demolition services, and reinforce their brand values. Develop a unique strategy of your own and use it as a tool to garner new contracts.
- Update your website - Another place you can attract new customers is on your website. Consider implementing a carefully considered search engine optimization (SEO) strategy. SEO is the process of improving website traffic by making its content more recognizable to search engines to bring in qualified users.
Focusing on the user-friendliness of the site itself is also important to attract new customers. For example, the homepage for Blue Marlin, an interior construction contractor in Miami, is an example of a successful, client-focused digital space. It provides clear access to the company’s portfolio, offers a mobile-friendly design, and even establishes authority in the field with a self-updating widget that highlights important numbers such as projects completed, years of service, and total team members. Offer a similarly positive impression to new clients by updating your website to outline your services and provide a simple, clear pathway for users to contact you. - Reach out to family and friends – Oftentimes, the best way to obtain new clients is by reaching out to those closest to you. Your friends and family who have, perhaps, witnessed your expertise and professionalism firsthand are excellent spokespeople for your brand. Inquire with those in your social circles to see if they know of someone in need of your services and encourage them to provide a word-of-mouth recommendation.
- Maintain your current relationships – As you begin the search for new contracts, don’t forget to keep tabs on your current clients. Checking in with them after a project has been completed shows that you’re invested and that you value upholding the quality of your work. For example, an HVAC marketing strategy may include seasonal maintenance reminders for existing customers. Maintaining these relationships will help to ensure that you’ve got more people in your corner when it comes time to build new ones.
#6 Start promoting your business on Nextdoor
Another way to take your business as a contractor to the next level is by claiming a free Business Page on Nextdoor. Not only can you share the news of your newly acquired license, but you can also take advantage of this hyperlocal platform to reach out to neighbors in your zip code. 67% of Nextdoor users are sharing business recommendations with their fellow community members, so make sure you’re one of the local businesses they’re talking about.
Build your clientele and your career as a licensed contractor your community can depend on with Nextdoor.
Sources:
ContractorsInsurance.org. The Different Types of General Contractor Licenses. https://contractorsinsurance.org/the-different-types-of-general-contractor-licenses/
Home Prep Education. Contractor Licensing Guide – State by State Courses & Requirements. https://www.athomeprep.com/contractor-licensing-guide-courses-requirements/
JW Surety Bonds. How to Obtain a Contractor License: A Step-by-Step Guide. https://www.jwsuretybonds.com/licensing/contractors/
