Episode•June 9, 2025•32 min

EP222: The Right Way to Start a Contracting Business

It might be intimidating to start a contracting business especially given the widespread belief that a major initial investment is necessary. This isn't always the case, though. A lot of prosperous contracting companies started off with very little money. In this episode, Brad talks about: The current opportunities in the contracting industry. Debunking the myth that you need a lot of money to start a contracting business. Importance of market research and identifying gaps in the industry. The significance of securing jobs before formalizing your business. Prioritizing investments in marketing and business essentials over flashy expenses. How finding a mentor or coach can accelerate your business growth. Steps to grow and scale your contracting business effectively. Link to Resources: Grab Brad's tell-all book: The Contractor Profit Blueprint https://thecontractorprofitblueprint.com Help us get the word out to other contractors by leaving us a review or sharing our podcast! Hosted on Acast. See acast.com/privacy for more information.

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Transcript

0:03

When you start a business, you don't try to impress everyone else. That's not the goal. That's your ego's goal. That's not the success goal. Hey, welcome back to the show. On this episode, we're going to be talking about the contracting gold rush. We're talking about how to start. a contracting business. We're going to go over some of the things you need to know about contracting, the easiest way to get started in contracting, and how to avoid some mistakes early on whenever you get started. So hold on to your seats. It's going to be a great one. Let's get started. Now, there's a misconception that a lot of people believe in that in contracting, you have to have a lot of money up front to start. You got to have a loan or you got to have lots of... upfront capital to be able to do this. And that's simply not true. Most contracting businesses probably start with very little money at all. Right now, there are some who are, you know, they're looking for a bigger picture and they have experience and they're starting another business or they're venturing into a different industry or whatever, and they know how to get money, capital, use it wisely, not waste it. And that is a viable option. Obviously, the more money you have available. the easier and quicker you're going to be able to fast track your business. But there is a ton of opportunity right now in the construction industry. It is a blue ocean of opportunity because there's more people leaving the industry than coming in. So there's tons of opportunity. There's tons of people that need services that are just looking for someone who is, you know, trustworthy and can do the work. And it's actually a great opportunity right now. And for the next, probably for the next decade. it's going to be a great opportunity. That's why I'm calling it the contracting gold rush. So if you've ever thought about starting a business, we're going to cover some of those things in this episode, but you don't need a lot of money to get started. I started with a thousand dollars in the bank and some hand tools that I had and a pickup truck. You know, I didn't go out and spend a bunch of money. And so I started with what I knew how to do and the easiest thing to get into at the time, which was doing more handyman stuff. Now, Going back, would I do that again? No, I would not pick that industry based on the challenges within that industry, but it is a viable option. If I were starting a business today and I had no business experience, but I wanted to get into construction, I would actually start out as a subcontractor working for other general contractors. And the reason is because it takes very little capital to get into that. You don't need a ton of money and expertise and connections to get into being a subcontractor. Here's the one thing I want to get across. What most people do wrong when they're starting a business is they go spend a bunch of money on things that don't matter up front. I remember early on, you know, I got QuickBooks because I thought I needed it. Well, yes, you do need that, but you don't need that added expense right from day one. And you can get by because you're not going to be doing that much work. When you first start out, you don't need to have tons of overhead and expensive things to get started. Right. I thought I needed these things. So I went and got, you know, subscriptions and different softwares and different stuff because I thought I was going to make my life easier, which it does. And eventually you will need those things, but you don't need them from the get go. What most people do wrong is they buy all the tools and they get all of the business stuff in line. And then they go out and try and get business. What you need to do before you start anything is go and find the business. Go and find people who need the work. Is there a demand? You may be wanting to do something that's very unique. Maybe you want to be a painter, right? But in your area where you're at, there's hundreds of painters. And it's going to be a much harder industry to break into because there's a dime a dozen of painters. Or maybe you want to do like, you know, home security systems and install those. Well, maybe there's already companies that do that or there's not a high demand for that. Like you have to do a little bit of market research first to see where the demand is. A lot of people will tell you, you know, find your passion and then you'll never work a day in your life. There may be truth in that for you specifically, but there's not truth in that for your business because you can be passionate about something that no one wants, right? Like you may love doing that. But if nobody wants your services, that's going to be a problem. So like doing the market research, where's the demand? Where is the gap in the industry? Like where are there opportunities that no one's fulfilling? You know, maybe you live in a town where one of my clients is in St. Louis and St. Louis is a, you know, it's called brick city because like the majority of the homes and businesses are brick. That's just what they use back on whenever that city was first built. So there's tons. and tons and tons and tons of property that's brick. Well, they're a brick mason. They do tuck pointing, right? They repair brick. Perfect. There's only like three other companies that do that. And there's hundreds of thousands of buildings that need, you know, they have brick that need work. So for them, it's almost unlimited demand, if that makes sense, because it's a very niche market and there's a huge opportunity. But maybe if you're a brick mason, and you live in a town that has almost no brick, very little brick, well, that doesn't make sense there, right? So the idea of what you want to do has to make sense or where you want to live and what the opportunity is. If there's an opportunity that no one else is doing within a niche, that could be your specialty. So like maybe you're an electrician and you want to start an electrical company. Great. Don't go and do all things electric. Pick one specific part of that that no one's doing and then specialize in that. Maybe most of the people that do electrical specialize in commercial. They do commercial electric, and there's very few people that do residential, or there's very few people that do service work. Well, maybe you do the service side of it because there's not very many people doing service work. Or maybe you specialize in solar, and there's not very many people doing solar, so you can get in and get all the solar work. Like just, you don't go into say, I'm going to be an electrician. And then that means all things electrical. There's niches within each trade that you can go into. I mean, you could be a handyman and all you do is hang pictures on the wall. And then you go work for art galleries and designers. And all you do is go hang pictures. That's a niche within a niche. Now, I don't know if there's enough business for that. But that's an example of how you can niche down and find a need that no one else is dealing. And if no one else is hanging pictures, guess what you get to do? You get to charge more, right? So what you don't want to do is figure out what everyone else is doing and then copy and do the exact same thing. Because you're just going to be just like everyone else. You're just going to be noise. You're going to be white noise in the marketplace. You're just another electrician that does it all. One call does it all, right? You're not going to stand out. So find something where there's a need and then fulfill that. But before you set up your LLC or your business and before you name your business, before you do anything, see if there's side work or if there's work available. Say, hey, I want to start building decks. Awesome. Go find somebody to build a deck for. Do it on the side. Do it at a discount. I don't care. Go out and get some work to prove to yourself that you can do it. to get a taste of what it's like to run your own jobs, not just being a carpenter for someone else, and then go and see what that's like and then build your reputation a little bit that way. The ideal way to start a business is to get enough side work that it starts to at least 50% of your income, your side work is producing at least 50% of your total income, then you can jump in and start doing that full time. That's like the ideal way to do that. That could be done in six weeks. It could take six months or six years, depending on how much energy, opportunity, all that stuff. There's a lot of variables. But you go out and you find the work first before you go build the whole business behind you. And I'll give you a perfect example of that. I mentioned in the last episode that my son and I were wanting to potentially get into the vending machine business to help him learn about business and give him some opportunities. I've already identified, reached out. talked to two different locations, and I've even went and visited one location, and they've basically verbally agreed. Now all I have to do is send them a contract to get the place on lock for a year, and then I can use that to lease the machines without having to pay up front, and then I can get into the business. I haven't even opened the business yet. I don't have a legitimate business. I haven't filed the paperwork. I don't even have a business name. I have one, an idea, but it's not on paper yet. I don't have anything figured out whatsoever about the business, but I already have two potential locations in one confirmed location to put the machines in. So in other words, I've already sold the work before I've even created the business. And so it's not this idea, if you build it, they will come. No, that's not true. You should go get it first. And then once you get it, then you fulfill it. So same with business. Go find the work that's out there and then build your business if there's enough demand for it. Going out there and using your name, Smith Construction. By the way, I've said this 100 times. The dumbest thing you can do is name your business after you. Use your initials or your name. It's the worst idea in the history of business. But your ego, you got to stroke your ego as much as possible. It's the worst idea. But before I even do that, I go out and find the business. That's the number one thing you got to do. Find and sell the business first and then figure out how to produce it. Most people are like, well, I don't want to sell anything if I don't know how to do it because I don't want to get in way over my head and I don't want to look like a dummy. Well, then you shouldn't be in business because 97% of the time you're going to look like a dummy anyways when you own a business because you're just figuring stuff out. That's what business is. You realize like as owning a business, your job is to deal with problems 90 plus percent of the time. Like people are going to bring you problems and you have to solve them. That's what owning a business is 90 percent of the time. You don't get to eliminate the problems. You're the one that has to make the decisions and solve the problems. That never goes away. As you grow your business and you have multiple employees and leadership, guess what? You still have your management. that comes to you with the big problems that they can't solve. They solve the lower problems for you. You don't, you never hear about those. They only come to you with the bigger problems. So the bigger your business gets, the harder, more difficult, more challenging problems that are brought to you. The problems never go away. That's your job as a business owner is to solve these problems. But if you're trying to solve problems that haven't yet been created, then you're just wasting your time and energy. So if you're trying to set up your business and you're trying to buy a truck and you're trying to get it lifted with, you know, your wheels and tires on there, and you're trying to get the business name created, and you're trying to go out and buy all these tools and all the software and build the entire business, and you haven't even sold one freaking job yet, then you're doing it wrong. You got to sell first and then worry about producing it. That's the number one thing that people get wrong when they start a business. And I did that. I went out and did bought all this stuff first because I thought that's what you had to do. And that's really, you don't need to do that first. So once you've basically proven the idea of the service, there's a need for your service and you've went out and you've sold some jobs and you've produced some of these on the side and now you're ready to start doing this full time. Now you can start, you know, setting up your business. setting up your LLC, talk to an accountant or an attorney and find out what the best strategy for you is. I can only tell you what I do personally, and I always set up an LLC as a sub S corp. That's just my default way of setting up businesses. I can't tell you that that's the best way for every business structure and what you're wanting to do. It's just what I do. But you go out and you set up your LLC or your business structure to make it legal. Then you have to send off for a EIN number through the federal government. That way you can open a bank account and you can hire employees. And then, you know, that's part of the process of getting set up and you can create your name. You know, once you have your name and you file for the business, then you can try to generate some logos or some marketing material to help back that. Right. Those are the things you do after you've sold some jobs. Not before. You don't have to have that stuff in place to sell jobs if you know how to communicate. Let me just ruin your day right now if you're wanting to start a business. If you think all you have to do is legally form a business, throw a magnet on your truck, and the phone rings off the hook, you're wrong. That's not how it works. The hardest thing you're going to do starting out is getting leads, is getting business. And then once you get some business and you start selling things, the second hardest thing you're going to do is get more leads and get more business. And the third hardest thing you're going to do is get more leads. Why? Because it never stops. You're going to have to be chasing leads from now until eternity. Until you close the business, you're going to be chasing leads nonstop. They don't come to you. Now, after you've been in business for many, many, many years, it does get easier. You get more referrals. But when you're starting now, you're going to be chasing leads nonstop. You like 40% of your time is going to be spent on marketing. Until you've reached half a million to a million in revenue, about 40% of your time and energy every day should be going towards marketing because that's the requirement. And people think that I do really good work. As long as I know how to swing a hammer, then people will somehow, they'll just know that I'm in business. Aliens will come down and go tell them that I'm in business and they're going to call me even though they don't know how to find me. They've never seen my truck. They've never seen anything about me. They're just going to know my number and they're going to call me and my phone's going to ring off the hook and it's going to be great. And all I have to do is show up and give them an estimate and they're going to hire me on the spot. I'm going to make a lot of money and then I go do the work and I get to set my own hours. That's the most ridiculous idea of what owning a business looks like. Yeah, that's what most people think owning a business looks like. I want to burst your bubble now before you even get into business.

14:57

Hey, just a quick time out from the show. If you're a frustrated contractor who's dealing with low profit margins, stuck working on the tools every day, or doing free estimates for people who are never going to hire you in the first place, I invite you to my private contractor community, The Profit Club, where contractors just like you are adding two to three times more profit each year without producing any more jobs and finally getting completely off the tools to never do another free estimate again. So if you're ready to increase your profits, stop doing free estimates and get off the tools, then all you have to do is click the link in the show notes to learn more about the Profit Club and see how it can easily two to three times the cash in your pocket, give you a proven sales process that will convert more jobs with ease and get you off the tools once and for all. And the best part is you can do all of this without having to produce more jobs than you currently are. Click the link to learn more. Now let's get back to the show.

15:51

It's extremely hard. difficult. It's a lot of work. And if you're not cut out for rejection, if you're not cut out for working on yourself, if you're not cut out for understanding that it has nothing to do with how you swing the hammer and the craft that you do, that is not what it takes to own a business, then you're going to be in it for a long, hard run. right? Starting a business, although there's tons of opportunity and you can get rich from it and you can have a great life from it. It's a lot of work and you have to work on yourself and you have to develop yourself and you have to develop every aspect of the business side, the non-related to swinging a hammer. The easiest thing you will do in your business is the actual swing in the hammer. Everything else you do will require you to learn, to go through pain and to suffer, to figure it out. The swing in the hammer is the easiest part. I've seen a lot of guys that start a business because they think that's all they have to do is throw a magnet on the truck and then everything else works great. Really what they're romanticizing is this idea of being a lead guy who gets all the profits. They don't think about all of the struggles that goes into owning the business, which is what my last podcast was about. Things that no one tells you. So go listen to that after you get done with this. Because they go hand in hand because that's the reality of it. But there's still a ton of opportunity in the construction industry to start a business if you do it right. If you're like my client, Kyle, who got coaching from day one of his business and was able to do almost $400,000 in his first year because he didn't have to go and figure all this stuff out the hard way. All he had to do was show up for a coaching call and we told him what to do. So find a mentor, get some coaching. Like don't try to figure this out on your own because you're going to completely slow down the growth period of your business if you try to figure it out on your own. You don't need to do that. So as I mentioned in my previous podcast or a couple of podcasts ago about starting the vending machine business, the first thing I did was go find an expert in that industry who was offering coaching and talk to them and see what that was going to take. Because once we decide to do this, By the way, we haven't fully decided yet because even though I have a location that wants to agree to it, I haven't sent them the contract yet. I haven't started my business yet. I can just say, we changed your mind. I can back out of it. But I've already talked to a business coach about that specific industry because I don't know anything about it. And if we do decide to do that, one of the first things that we're going to invest in is coaching because it's going to save me days and weeks and hours and months and years of agony. and wrong decisions when I can just have someone else tell me what to do and how to do it well. So if you're starting out of business, go find a mentor local to you. I mean, a true mentor who's local, not a guru on the internet who is telling you he's a mentor. I'm talking about go find an actual mentor, someone in your area that you can walk into their office and sit down and have a conversation who's willing to pour into you and help you. Go do that. If you can't find that, then you can hire someone who, a coach who can help you with those things. That's the best investment you can make. It's better than any tool you can buy. If you want to start an excavating company and you have to buy an excavator, hiring a business coach is going to be a hundred times more valuable than buying an actual excavator. And you're like, well, Brad, that's stupid because I have to have an excavation to dig dirt. That's true. But if you buy a business coach or hire a business coach, He can tell you exactly what kind of equipment you need. You may think you need a big piece of equipment. He's going to tell you that's a wrong idea. It's actually better if you buy a mini excavator and a skid steer combo for the price of that one big excavator, because it's going to allow you to do this and this and this, and you're going to make three times as much money than you will if you go buy that big excavator, right? So like having that expertise is what's going to help you save you money in the long run and make you a lot more money. Now, once you've... sold some jobs, and now you need to start your, you'll legally start your business and you've created a logo and you've talked to, you've hired a business coach or found a mentor. Now you're really to start ramping up things right now. In the very beginning, you're going to get sympathy business. Your parents, your family, your friends, your neighbors, everyone in your immediate network is going to send you business. One, because they want to help you out. They want you to succeed. Two, because they're expecting to have a discount. They want to get a little bit of a discount. There's nothing wrong with doing that to get started, to get reviews and further business. But once you blow through your network, whether it's six days of work, six weeks, six months, eventually you're going to blow through your local network and then all of a sudden you have no leads. Because you really haven't been marketing your business this whole time. So once you get your stuff set up and you've sold a few jobs, you're going to start marketing your business. You're going to open up the social media channels. You're going to get a Facebook and a TikTok and an Instagram or whatever else is, you know, at the time of listening to this, if it's two years from now, there's probably something else taking off. You're going to get some kind of social media. You're going to make sure you have a website. You're going to invest in these things. As soon as you can, and as soon as you can financially afford it, you're going to invest in these things before you lift your truck, before you buy a new truck, before you put the 33s on there. You're going to go get a website. You're going to open up the stuff. You're going to have uniforms. You're going to invest in your business first before you try to look like you're making it. I know your ego is important to you, and you got to try to impress everyone, especially your mom. Because she's the one that's going to be posting on your social media and saying, son, I'm so proud of you. You know, you bought that brand new F-350 and lifted it and put the wheels on it. I'm so proud of you. Right? I mean, she's obligated to say that to you regardless. But I know our ego needs to have that stroke to make us feel good about ourselves. But if you're listening to this, before you actually invest money in stupid crap, you should invest it in your business. Because when you invest things, that comes back to you with its friends. An investment brings you more. It's supposed to bring you back more money than what it costs you. Your new truck, your new wheels, your lift, that's not an investment. That's an expense. You're just burning money. If you buy a website, if you invest in a website, that website should generate new leads for you. If you invest in business coaching, that coaching should bring you more knowledge and more money back to you through efficiencies and you know, the right things to do. Those are investments. Those are not expenses. What we tend to do is spend all our money on expenses because we really want to try and fool everyone else that we've made it. There's so much posturing that goes on in the construction industry. It's absolutely ridiculous. And anyone who has gone through that and has survived and had success on the other side can see right through that. We know that you're absolutely full of crap. I mean, we know it. I don't have to know anything about your business. I know if I see your equipment and what you post on your personal page, that you're absolutely full of crap. I can see it plain as day. It's like nine day difference. I go to Home Depot. I see a brand new company I've never heard of, never seen it. Smith Construction. We do it all. One call does it all. Got a brand new truck lifted, chrome wheels,33s, you know, and I'm like, this guy's going to be out of business within six months. Because he just blew all of his money to look cool rather than actually invest in his business to make money. Guys, do not try to look cool in the beginning. Don't try to impress other people. That's the quickest way to go out of business. When you have money in the bank, when you have lots of money in the bank and you can go pay cash for that stuff and it doesn't even set you back, then you can go do that. When you start a business, you don't try to impress everyone else. That's not the goal. The goal is not to impress other people. That's your ego's goal. That's not the success goal. Reinvest, pay yourself as little as possible to survive for the first year you're in business. And every extra penny that you make goes back into your business to grow it. After one year, now you take that extra money and start paying yourself because we don't want to just keep reinvesting everything, even though we don't pay ourselves enough. Because that's what I did for many years. You know, it's easy to like only pay yourself $30,000 a year. And then, you know, put $30,000 or $50,000 back into your business each year and say, well, I'm investing in the business. But in reality, you should be able to pay yourself $100,000 a year and still invest 30,40, $50,000 back into your business. It's because you're not charging enough and not making enough money, but you're lying to yourself that you're reinvesting. For the first year, that's cool. Do that. But after that, you have to actually start making some money. We don't make money and then go buy dumb crap. We don't need to go buy tools that we're going to use one time and then not use it again because we just like buying tools. I can tell you right now, my favorite thing to do is go buy tools because it made me feel like I was in some way successful because I could afford to buy tools. And I bought lots of tools and tools I didn't need. And it was just a waste of money. It was a complete waste of money. It was a way for me. It's like people that are addicted to shopping. Right. It was a way for me to feel like I was having success because I could go buy tools, but I really couldn't afford to pay myself more than what I should have. So don't get trapped in that either. Like that's the ego part of it. So when you're starting your business, we're not going to waste money on stupid crap. We're going to go sell first, then start producing, then start working towards marketing ourselves. Then we're going to eventually hire professionals, marketing professionals. We're going to hire other people to do things for us. And then we're going to grow our business organically through hard work and determination and then hiring the right people to help us further grow. So you're going to do most of the work from the get-go. And most of your time is going to be spent doing free marketing activities. Now, if you have some extra money, great. You can use that for marketing. But most people that start with very little or no money, you're going to be doing all the marketing at first until you can start saving money and making money. then you can start hiring professionals to do that for you. So as you make more, you trade off some responsibilities, you make a little bit more, you trade off more responsibilities, so on and so on. That's the long-term game. Eventually, you don't have to do anything. You can hire a general management and management team, and then all you're doing is checking in and seeing how things are going, giving some guidance and direction, but you're not handling the day-to-day activities. That's the long-term goal. So let me just kind of recap real quick the right way to start a business for contractors. Go do your research first. Before you do anything, go research where there is a need and where there's opportunity. And where there is a need and opportunity, overlap each other, that's where the money's at. Okay? Now, I will throw in one other thing. If you get into something that is new and then other people see you having success, you will have competition eventually trying to steal your market share. The beauty, though, is that if you're first to market, then you have staying power because you were the first one in the market. So the other people are always playing catch up to you because you were there first. If you're trying to enter a market where there's other people there, then you're going to be playing catch up to them the whole time. I'm not saying you can't overcome them, but you're going to be spending the majority of your time in the beginning trying to overcome them. If you're first to the market in an area, everyone else is going to be playing catch up to you. Okay? So find a niche, find a need. Go out and sell some jobs first. Then once you've sold some jobs, then worry about organizing your business legally. Do all this stuff. Talk to an accountant or attorney to help you get that stuff set up. File your LLC or whatever. File for your EIN number. Go open up a bank account. Get your logos designed while you're selling jobs still. And by the way, you do these simultaneously. You don't just do one and then do the other. You're still selling jobs the whole time. Start marketing yourself. Start building your social presence. Start joining networking events and going and marketing with other people, networking with other people. And then once you do that, once you start building your business, you take your money and you reinvest into it. You find yourself a business coach or a mentor to help shortcut that learning process so you don't have to make all the same mistakes. Take your money, reinvest it into things that are important. Get your website, get your marketing down. right? Reinvest. Then you start hiring people to take over some of those responsibilities that you're currently doing to free up your time to do more higher level tasks. And then eventually, as you've grown and marketed and mastered these areas, then you start getting more and more free from the business because you're hiring other people to do the tasks that you're doing. And you're only focused on the most high value tasks that you can do. And then eventually you can hire a management team to do that for you. Now that could be five years. It could be 20 years before you get there. Depends on how much you put into it. Depends on a lot of things. If you're single, you can work 24 seven. If you're married with kids, you have responsibilities outside of work. It's a little bit more difficult. So like that, there's a lot of factors that go into this, but right now is a, is an excellent time to start a contracting business. If, And only if you do it correctly. Don't waste your money on stupid crap, guys. You're only lying to yourself. Everyone else knows you're full of crap. Okay, so just don't do it. Just trust me here. Don't waste your money on the stupid crap to try and impress people. They're not impressed. Your mom is the only person that's going to be impressed with you. That's it. I promise you. All right, guys, that's it for this one. A little quick and dirty. I appreciate you hanging out with me. You can always find me on the socials. Just search for the Hammergrind Podcast. Remember, if you haven't picked up my book yet, definitely grab that, The Contractor Profit Blueprint. This also is going to give you some key indicators and knowledge of what you need to start your business. You can just go to thecontractorprofitblueprint. com to buy that book, or you can go to the show notes and get a link there. And yeah, if anything I can do for you, if you're starting a business, reach out to me. I'm happy to help you. you know, to a certain degree, give you some free resources. You can always join my Facebook group as well called the Contract Your Profit Blueprint. We talk about things in there. You can ask as many questions as you want to help you get started. You can get some free mentorship there. You know, it's not going to be, you know, as good as coaching, but I'm there in myself and my clients are in that group to help you grow your business and answer some of those questions. So use us, use the group, use the resources. to help you get started and get you on the right path from the get-go. So that's all I got, guys. Remember, until next time, profit is not a dirty word.