Written by

Tara Farmer

July 1, 2025

Edited by

Jennifer Carlson

Fact-checked by

Kristen Cramer

How do you become a contractor?

So you're thinking about becoming a contractor? Smart move! The contracting world offers flexibility, high earning potential, and the chance to be your own boss. But where do you start? This guide will walk you through everything you need to know about how to become a contractor and launch your successful career.

What is a contractor?

A contractor is a professional who provides specialized building services to clients on a project-by-project basis. Unlike employees, contractors maintain control over their work schedule, clients, and business operations. In construction, you might be a general contractor overseeing entire projects or a specialized trade contractor focusing on specific aspects of the build.

The construction contracting lifestyle isn't for everyone. It requires trade expertise, business savvy, and comfort with seasonal fluctuations. But for the right person, it can offer tremendous freedom and financial rewards that traditional employment simply can't match.

Types of contracting work

The construction industry offers diverse contracting opportunities. Your background, training, and certifications will naturally guide you toward certain specialties. Many successful contractors start in one area and expand their services as they grow their business. Some popular specialties include:

Steps to become a contractor

Whether you're aiming to specialize in a specific trade or become a general contractor, the journey to establishing a successful contracting business follows a similar path. The following step-by-step guide will walk you through the essential stages of launching and growing your construction business.

1. Assess your trade skills and local demand

Before diving in, take stock of your construction expertise. Are you a master plumber, skilled carpenter, or experienced electrician? What specific services can you offer? More importantly, is there demand for these services in your local market?

Research building trends in your area, average rates for your trade, and potential competition. Talk to existing contractors in your field. Understanding the local construction landscape will help you position yourself effectively and identify profitable niches.

2. Get proper training and certifications

Construction contracting requires legitimate expertise. Ensure you have the necessary training, apprenticeship experience, and certifications for your specialty. Many trades require specific licenses that vary by state or municipality.

Consider additional certifications that might set you apart, like green building credentials, safety certifications, or specialized installation qualifications. These extras can significantly increase your marketability and allow you to charge premium rates.

3. Create a business plan

Even a simple business plan can make a huge difference in your success. Outline your construction services, target clients (residential vs. commercial), pricing strategy, equipment needs, and financial projections. This roadmap will guide your key decisions.

Your business plan should also include your unique selling proposition. Do you specialize in historical renovations? Energy-efficient installations? High-end custom work? Defining your niche will strengthen your marketing efforts in the competitive construction market.

4. Handle the legal requirements

Now for the paperwork. Legal requirements for construction contractors are particularly stringent and typically include:

• Obtaining proper trade licensing

• Securing a contractor's license (general or specialty)

• Choosing a business structure (sole proprietorship, LLC, etc.)

• Registering your business name

• Obtaining a federal tax ID number, or EIN

• Getting substantial insurance (general liability, workers' comp, builder's risk)

• Securing bonding (often required for larger projects)

Don't skip this step! Operating without proper licensing and insurance in construction puts you at enormous risk. Consult with an attorney familiar with construction law to ensure full compliance.

5. Invest in essential equipment

As a contractor, your tools and equipment are vital business assets. Make a detailed inventory of what you'll need, distinguishing between immediate necessities and future investments as you grow.

Consider whether to buy, lease, or rent specialty equipment based on usage frequency. Quality tools are worth the investment, but you don't need to purchase everything at once. Create a strategic equipment acquisition plan aligned with your growth goals.

6. Set up your finances

Contracting involves cash flow management. Open a dedicated business bank account and consider getting a business credit card with good rewards. Invest in construction-specific accounting software like QuickBooks for Contractors. Setting up proper systems now will help you track profitability by project and maintain healthy cash flow.

7. Determine your rates and bidding strategy

Construction pricing requires detailed knowledge of material costs, labor requirements, and overhead expenses. Develop clear estimating procedures for:

• Materials (with consideration for waste factors)

• Labor hours (including subcontractor management)

• Equipment costs

• Permits and inspections

• Overhead allocation

• Profit margin

Many new contractors underbid, hoping to win projects with low prices. This strategy can be disastrous in construction, where unexpected issues are common. Learn proper estimating techniques to ensure profitability from day one.

8. Build your brand and local presence

In construction, your local reputation is gold. Establish your credibility with:

• A professional website showcasing your projects with before and after photos

• Branded work vehicles and job site signage

• A comprehensive contractor profile on HomeGuide

• Membership in local builder associations and chambers of commerce

• A consistent presence at home shows and trade events

Your branding should reflect quality, reliability, and professionalism. Construction is a highly referral-based business, so every visible element of your company should inspire confidence.

9. Document your work and get testimonials

Property owners want evidence of your craftsmanship before hiring you. Take high-quality before, during, and after photos of every project. Create a portfolio that highlights different aspects of your expertise.

Video testimonials from satisfied clients are extremely powerful in construction. Ask satisfied customers if they'd be willing to be photographed with your completed work and provide a testimonial. These social proofs are marketing gold.

10. Develop a client acquisition strategy

Finding construction clients requires industry-specific approaches:

• Building relationships with general contractors (if you're a trade specialist)

• Establishing connections with architects and designers

• Networking with real estate professionals and property managers

• Creating partnerships with complementary trades

• Implementing a referral rewards program for past clients

• Targeted direct mail in neighborhoods where you've completed successful projects

11. Create professional documentation

Contracting requires robust paperwork. Never start a project without these essentials:

• Detailed contracts specifying scope, materials, timeline, and payment schedule

• Change order forms for project modifications

• Lien release documents

• Warranty information

• Permit applications and inspection certificates

Have an attorney with construction experience review your standard documents. In this industry, proper contracts protect you from scope creep, payment disputes, and liability issues—all common challenges in building projects.

12. Establish efficient project management processes

Strong organization is essential for contracting success. Contractors should set up systems for scheduling projects, tracking milestones, coordinating materials, and managing subcontractors. Effective organization also includes maintaining quality control, preparing for inspections, and keeping clients updated with progress and decisions needed.

Document management is crucial, so organize permits, inspections, and warranties for easy access. By developing these systems, contractors can streamline operations, reduce errors, and ensure projects run smoothly from start to finish.

How to become a general contractor

While many construction contractors focus on specific trades, becoming a general contractor opens up different opportunities and challenges. General contractors oversee entire construction projects, coordinating multiple trades and managing the overall build process from foundation to finishing touches.

What does a general contractor do?

As a general contractor, you'll serve as the project manager and central point of contact for construction projects. Your responsibilities typically include:

• Obtaining building permits and ensuring code compliance

• Hiring, scheduling, and managing subcontractors across different trades

• Sourcing and purchasing materials

• Managing project timelines and budgets

• Coordinating inspections at various stages

• Communicating with clients about progress and decisions

• Troubleshooting issues that arise during construction

This role requires broad knowledge of construction processes, excellent organizational skills, and strong people management abilities. You don't need to be an expert in every trade, but you must understand enough to effectively coordinate work and spot problems.

Special requirements

Becoming a general contractor typically involves more stringent requirements than specialized trade contracting:

• Higher-level contractor licensing (often with specific testing on business management, law, and general construction knowledge)

• Greater bonding capacity and insurance requirements

• More substantial business experience

• Larger financial reserves or access to capital

• More extensive record-keeping systems

Research your state's specific general contractor licensing requirements carefully. Many states require several years of documented experience in construction before you can qualify for a general contractor's license.

Transitioning from trade contractor

Many general contractors start out as specialized trade contractors, gaining practical experience before moving into broader project management roles. To make this transition, work on larger projects within your trade, build relationships with other contractors, and take courses in business management and construction law.

Begin by managing small renovation projects and seeking guidance from an experienced mentor. This step-by-step approach helps you develop essential skills, expand your network, and minimize risk as you move into general contracting.

Building your team

Success as a general contractor depends heavily on your network of reliable subcontractors. Start building relationships with quality tradespeople in all the major specialties:

• Excavation and foundation contractors

• Framers and carpenters

• Roofers

• Plumbers

• Electricians

• HVAC specialists

• Drywall and finishing contractors

• Painters

• Flooring specialists

• Landscapers

Their quality and reliability directly affect your reputation, so take time to properly vet potential subcontractors by checking their licensing, insurance, past projects, and references.

Estimating and bidding

General contracting requires more complex estimating skills. You'll need to accurately calculate:

• Costs for all trades involved in the project

• Materials across the entire construction process

• Permit and inspection fees

• Project management time

• Contingency reserves for unexpected issues

• Markup percentage to cover overhead and profit

Many successful general contractors use the "cost-plus" model—charging actual costs plus an agreed percentage—for complex custom projects where exact specifications may evolve. Fixed-price contracts work better for clearly defined projects with stable material costs.

Risk management

As a general contractor, you'll face more significant financial and legal exposure than most trade contractors. Robust risk management is essential and should be a core element of your business operations, not an afterthought.

• Carry comprehensive insurance including general liability, builder's risk, and commercial auto.

• Maintain higher coverage limits than trade contractors (typically $1 to $2 million minimum).

• Consider additional policies like professional liability insurance to cover design suggestions.

• Implement strict safety protocols on all job sites.

• Require proper insurance certificates from all subcontractors.

• Use detailed contracts with appropriate indemnification clauses.

• Maintain thorough documentation of all project communications and decisions.

Common challenges for new contractors

All contractors in the construction and building industries face significant challenges, regardless of specialty. The table below details the most common challenges for new contractors and offers solutions to help your business become and stay successful.

Additional challenges for general contractors

Beyond these industry-wide challenges, general contractors encounter unique obstacles:

• Cash flow management across multiple concurrent projects

• Subcontractor reliability and performance issues

• More complex permitting and compliance requirements

• Greater exposure to market fluctuations and material shortages

• Higher liability for project delays and quality issues

• More intensive client management and expectation setting

Successful general contractors develop systematic approaches to address these challenges, including thorough vetting procedures for subcontractors, detailed progress tracking systems, and disciplined financial management.

FAQs about becoming a contractor

How much does it cost to become a contractor?

The cost to become a contractor can vary significantly based on your specialty and scale, but most trade contractors can expect initial investments of $10,000 to $50,000. This typically covers basic equipment, insurance, licensing fees, vehicle expenses, and initial marketing.

General contractors often need $75,000+ to cover higher insurance requirements, office setup, and working capital. Many successful contractors start small, using personal tools and a home office, then reinvest profits to gradually expand their operations.

How long does it take to become a contractor?

Most construction contractors report that it takes 1 to 3 years to establish a stable, profitable business. Most spend their first year dedicated to building a reputation, securing initial clients, and refining operations. By year two, they start developing repeat business and referrals.

Trade contractors often reach stability faster than general contractors, who face more complex project management and longer job cycles.

Do I need a college degree to become a contractor?

You don't need a college degree to become a contractor. The industry values hands-on experience, trade skills, and proper licensing. State licensing often requires college-level course work but typically allows for substituting equivalent work experience. Many contractors enter the field through apprenticeships, technical training programs, or working under established professionals.

However, business management classes can be extremely valuable, especially for general contractors who manage complex projects. Additionally, some specialized areas like commercial construction management may benefit from formal education.

Growing your contractor business

Once you've established yourself, consider these growth strategies:

• Expanding into complementary trades or services

• Adding design capabilities or showroom space

• Hiring project managers to oversee multiple jobs

• Developing relationships with larger commercial clients

• Creating a maintenance division for recurring revenue

Growth in construction should be carefully managed. Each new project type, service area, or employee adds complexity. Some of the most successful construction contractors maintain a manageable size where they can ensure quality while maximizing profitability.

Remember that in construction, your reputation is everything. Focus on doing quality work, completing projects on time, and communicating clearly with clients. Word spreads quickly in local communities, and a solid reputation for excellence will become your most powerful marketing tool!