Starting a company can be a daunting quest, and making the right preparations enables you to make relevant decisions that help you turn your startup dream into reality. When looking to begin a contracting services company, you have to take certain steps and look at different factors to ensure you establish a solid foundation for future success in your industry of interest. Here are the steps to take when thinking about starting a contracting services company:
1. Start with a Detailed Plan
The first step to starting a contracting service company is preparing a detailed business plan. This plan includes identifying your business name, which is vital since it will be the key to marketing your brand. It is also essential to verify that your preferred name is available by checking social media platforms, web domain availability, your state’s business records, and state and federal trademark records. You also want to incorporate specific details such as expenses involved in opening and operating the company into your plan.
· Startup Costs
The starting costs vary depending on what type of service you intend to provide. Construction estimates for starting investments are significantly higher than the amounts required when starting a tree removal company.
· Ongoing Costs
Ongoing costs need you to pay for additional services as your business grows. For instance, if you want to work for a construction company, you must consider contractors insurance and the fees when hiring roofing contractors or any other kind of contractor, since, as a new start-up, you will have many different kinds of services you need to be done, such as an asphalt paving contractor for a continuing project.
2. Identify Your Target Market
The following step is to determine your target market by looking at who will need the services your company will provide. Various target markets behave differently, and thus, you can expect varying behavior and operations depending on your service type. For example, if you intend to start a commercial window tinting company, your target customers are car dealerships. Dealerships have long payment cycles, taking an average of 30 days to pay.
In contrast, a client typically immediately pays when you have a heating and cooling service company whose electricians complete various kinds of services, such as installing fire suppression in a home’s heating and cooling system. Hence, you must know your target market and its expectations to help you better plan and manage your operation costs, avoiding overspending on late customer payments.
Aside from these, you also want to establish the charging rate to apply to the customer. Different factors influence the amount you determine, including the service industry, hourly rate versus periodic payment, the time needed to complete the task, the need for additional workers, and purchasing materials.
3. Establish a Legal Business Entity and Register for Taxes
The third step is to create a legal identity for your business, with the most common types including a corporation, partnership, proprietorship, and limited liability company.
· Limited Liability Company (LLC)
LLC is a hybrid comprising sole proprietorship, general partnership, and corporation, with its owners referred to as members. Notably, most states permit a single-member LLC, meaning an LLC with only one owner. LLC requires you to file an informational tax return because the tax system recognizes it as a pass-through entity. As such, LLC members report their share of losses or profits on their individual income tax returns after the business income passes to them through the business.
· Sole Proprietorship
This business structure has no legal distinction between the business and the owner, with the entity owned and operated by a single individual. It is the most popular structure type used by small businesses and has pass-through taxation. Therefore, the loss or profit passes through the business to the owner’s tax return.
· General Partnership
This entity is an association between two or more people with a partnership agreement that formally stipulates business details such as ownership percentages, management rights, profit/loss sharing, and dissolution terms. A general partnership does not pay federal income tax but reports income and losses from its operations by filing an annual information return with the IRS. The losses and profits pass through to the owners according to the stipulated profit-sharing percentages. After that, each partner pays taxes on their share of the loss or profit.
A corporation is the most complex legal entity, having the ability to enter into contracts separately from its shareholders. You can find two types of corporations: S-Corps and C-Corps, with their differences coming from their tax treatment. In S-Corps, the shareholders report the losses and income on their tax returns. S-Corps also avoids double taxation, since the shareholders pay the federal income tax at their rates.
On the other hand, C-Corps file their tax returns and are subject to corporate income tax on any corporate profits. Shareholders of C-Corp enterprises also pay personal income tax on the profits distributed by the corporation to owners, resulting in double taxation.
Whichever business entity you select, it is essential to work closely with your attorney to ensure you understand the liability details and formation demands before registering for tax. In doing so, you can find it easier and convenient to deal with your state tax requirements and avoid legal issues from ignorance or mismanagement.
4. Open a Dedicated Business Credit and Banking Accounts
Having a dedicated business account separate from your account helps you reduce the risks of personal asset losses if someone sues your company. This separation also gives you a chance to build business credit, which, in turn, enables you to obtain credit cards and financing methods in your company’s name. As a result, you can enjoy higher lines of credit and better interest rates to complement steady growth using a good company credit history.
You also need to set up business accounting to record various sources of income and expenses. Having detailed and accurate accounts aids you in understanding your company’s financial performance while making it easier to file your annual tax returns.
5. Get the Required Documentation
It is vital to know the legal documentation needed to run the contracting service company you want to establish. You need to apply for and get permits and licenses since operating your business without them can lead to substantial fines or the shutdown of your company.
In addition, your business will require insurance to run lawfully and safely as it protects your business’ wellbeing in case of a covered loss. Different business types have different insurance policies available to address the different risks they face. Most startup businesses start with General Liability Insurance and Workers’ Compensation Insurance, such as contractor’s insurance that protects your employees.
It is also best to understand how to prepare service agreements to ensure clarity and reduce the risk of legal disputes with clients. For instance, if you want to start a tree service company, you can prepare an agreement for your clients to sign, setting out details such as service level expectations, payment terms and conditions, and intellectual property ownership.
6. Define and Market Your Brand
You want to create a strong brand that will make your company stand out from the competition. Smartly marketing your brand and company will enable you to garner more business for growth. You can start with personal referrals, word of mouth, and integrating social media into your advertising program to build your reputation in the industry.
For example, if you want to start a drain cleaning service, you can incorporate high-quality technology among your operating methods to make you stand out from traditional techniques. You can advertise your brand as an effective company cleaning sewer lines using hydro jetting to target residential and commercial customers.
Upon defining and marketing your brand, you want to create a business site and install a business phone system. These setups will give your company legitimacy while making it convenient for potential clients to find and contact you.
Tips for Finding Success When Starting a Contracting Service Company
After completing the above steps to starting a contracting service company, what can you do to ensure a successful setup and progress? Here are some pointers to having a successful startup:
· Know Yourself
Being true to yourself ensures you know your limits, including what you are willing to do to succeed and the amount of money you are willing to risk. In addition, knowing yourself helps you select the right business for you, with success lying in identifying the needs you can fill.
· Know Your Competitors
Contracting services is a competitive industry, and researching the market lets you know what your competitors are doing. This knowledge can guide you in knowing what to incorporate to make your new company stand out.
· Stick to Your Business Plan
Your business plan offers a skeletal roadmap showing your company’s goal, and sticking to it allows you to know where you are heading. It also aids you in learning more about your customers, competition, and the industry as you begin and progress your service business.
· Get to Know Investors
Suppose your contracting service company will require investors to grow, research investors to learn their interests, and you can get some to invest in your project. You can attend meetings where investors speak or participate and meet them when you get a chance. As such, it is also generally advisable to prepare and rehearse a pitch before attending such conventions to help you make a proper presentation, even in impromptu opportunities.
· Avoid Procrastination
You may think that having all the pieces of your plan and company in place before starting the business ensures that the company will work and succeed. However, this approach can easily lead you to procrastinate while waiting for certainties that will not come. No one ever has everything perfect before beginning a company. Thus, put your idea into effect as soon as you have your rudimentary plan in place and follow the above steps to commence a business.
· Learn from Others
With different contracting service companies already in the market, learning from others’ experiences is ideal. You can begin by joining groups with like-minded members or finding a mentor for genuine advice. If possible, take training courses and attend industry conferences to learn everything you can about your industry of interest. Such preparation enables you to avoid multiple trials and errors by looking at what your predecessors did.
Elements that Influence Customer Satisfaction
Now that you know the steps to take to start a business and the tips to ensure success, learning what facilitates customer satisfaction is advisable. The primary concern of a contracting services company is to satisfy its customers. A happy customer will return to your company while increasing your marketing opportunities through referrals. Ensuring that you have the following elements will help you meet customer demands and satisfaction:
· Personalize Interactions
Engage with your customers from the start of the task to the end, ensuring open and clear communication. You can also incorporate multilingual staff or support to interact with different clients.
· Make it Simple
You want to make everything about your business accessible, from your website to talking to staff. Create a website that customers can easily navigate and browse. Additionally, ensure you can explain details about your brand and answer questions regarding your service with simplicity.
· Use Logic
Logic requires you to understand your clients’ expectations to meet or exceed them. Offering logical reasons to your customers enables you to explain why they should pick you over your competitors. This approach also helps you add more emotionally satisfied customers to your portfolio by converting rationally satisfied ones.
· Offer More Choices
Depending on your company’s services, you want to give your clients more choices with proper support to enable them to identify what suits their needs best. If clients have more selections, it positively affects your brand since they can closely participate in the servicing experience.
· Remember Your Customer’s Needs
Recalling your client’s needs means they can avoid frustrations by telling you details for their concerns repeatedly.
Using the information presented here, you can know the actions to take to begin materializing your idea of starting a contracting services company. With these steps, you can successfully begin your company and operate it with satisfactory customers and results.