Are you considering starting your own general contracting business in California? While there are many steps involved in setting up your company properly, doing so will keep you organized and compliant and ensure your credibility to future clients.
There are five key steps to consider when starting a general contracting business in California, which I will cover in today’s video. These steps include:
- licensing and compliance
- contracts and subcontract agreements
- accounting practices
- lead gen/marketing
- Insurance and bonding
Licensing and Compliance
First, it is important to identify the type of classification you need. You will either need a Class A General Engineering Contractor License, Class B General Building Contractor License, or Class C Specialty Contractor License. Then, you will need to complete the education and credit requirements, fill out a licensing application, complete a background check, and pass the state licensing exam. Phew! The state of California will also need to ensure you carry the right insurance and bonds – and proof of compliance – but we’ll get to this later.
The California Contractors State License Board website has forms and applications for the licensing process.
Contracts and Subcontractor Agreements
It is critical that you set up sound contracts and subcontractor agreements from Day 1. We advise that you seek legal counsel to finalize these documents. You can also obtain draft contracts from places like LevelSet, a great resource. Contracts detail the rights, roles, and responsibilities of all involved parties. They also entail the scope of work, general business information, your licensing and insurance coverage, change orders, payment information, how to resolve a dispute, flow-down provisions, and termination information. Be sure to have your attorney review the clauses of each contract, especially around payment terms, which are trickier for subcontractors since the money typically flows through many parties before the subcontractor is paid.
Accounting Practices
Like sound contracts, it is important to have sound accounting practices in place when you start your general contracting company. We recognize that numbers aren’t fun for everyone, which is why finding online bookkeeping software can be extremely helpful. We realize that your finances are complex because you balance many different factors, from changing operating costs to fluctuating costs of goods sold to long-term projects billed over time. To get yourself started, find online bookkeeping software; set up a business banking account that is separate from your account (for this, you will need an employer identification number or EIN); determine how you are going to track transactions for each job (AKA job costing); record all of your daily transactions and business expenses; create an invoice template like this; determine your revenue recognition model (completed contract method or percentage of completion method); and pay estimated taxes by signing up for a Electronic Federal Tax Payment System (EFTPS) account. If this sounds like a lot, it’s because … it is! But with the help of an accountant, who you can consider hiring as an independent contractor, you will be in good hands. And let me tell you, as someone who works with hundreds of contractors, those with accountants or bookkeepers are always more organized and prepared.
Lead Generation and Marketing
Having properly organized your business (and kudos for not overlooking steps 1-3), it’s time to delve into lead generation and marketing. Hubspot, a treasure trove of marketing insights, outlines the “Four L’s” of lead generation: lead capture, magnets, landing pages, and lead scoring. Lead capture, or “opt-in,” involves offering a value item on your website to collect email addresses. This value item, your lead magnet, could be a free webinar, an informative white paper or PDF with FAQs or bonus tips, or even a free mini-training series. Offering these resources in return for an email increases the likelihood of sign-ups. Remember, give before you take. Next is the landing page, distinct from your website’s main page, serving as a dedicated tool for a specific marketing campaign. For instance, if you’re promoting a free video series on collaborating with a general contractor for your restaurant’s tenant improvement project, you’d create a dedicated page where prospects can submit their email to access the video. Lastly, you can gauge potential clients by their actions, assigning higher scores to those who engage more with your content. Marketing and lead generation are vast, so Hubspot is an invaluable resource for ongoing guidance. Meanwhile, be clear about your marketing goals and definitions of success, monitor your progress, and phase out ineffective strategies.
Insurance and Bonding
At Fusco Orsini & Associates, we know you want to be a successful general contractor in California. But first, you need business insurance that addresses the factors of your high-risk industry, including potential lawsuits, mishaps, and losses. At our agency, we’ve worked with hundreds of general contractors in California and nationwide to help them find the best-fit coverage, such as:
- General liability
- Workers Compensation
- Builders risk insurance
- Pollution liability insurance
- Commercial auto insurance
- Contractors license bond
- And more
Here, we break down the 4 best workers’ compensation programs that every California general contractor should know. Our team stays abreast of ever-changing California laws affecting general contractors, and we’ve helped hundreds of folks stay ahead of rate changes, policy changes, and market changes.
Please reach out anytime by phone or text at (858) 384-1506, or complete the form below, and we will contact you promptly. Thanks again for visiting!
