Levelset

Construction companies need capital to get off the ground, stay in business, and keep growing. The term capital is used across industries to represent all of a company’s financial assets, including cash, inventory, equipment, and more. 

Several different types of capital — working capital, debt capital, and equity capital — are common in the construction industry. Construction companies need a solid understanding of capital to run a successful business. 

In this article, we’ll explain what construction businesses need to know about the different types of capital available — and how to use them. 

What is capital?

Capital is a fundamental financial concept meaning anything that is able to generate value. Money, for example, is a basic form of capital because it can be used to invest and create more wealth. But capital can take many other forms: Human capital, for instance, is labor that can build wealth. Construction businesses may have equipment, materials, or technology that function as capital, too. 

However, when most construction companies think about capital, they are almost always thinking about cash. That’s because other forms of capital — like labor or equipment — can’t generate value if you don’t have enough cash to take on new jobs, acquire materials, or cover overhead. 

Joshua Leyenhorst, a CPA at BasePoint who has worked with many construction companies, defines capital like this: “Capital is all of the financial resources available to start or maintain a construction company, including working capital, debt capital, and equity capital.”

Each type of capital has a specific purpose for construction businesses as they get started or look to grow. 

3 types of capital for construction

Construction companies need to know the differences between the three types of capital and why each one is useful for managing and growing a business. For most businesses, working capital will be front of mind, but debt capital and equity capital serve important purposes as well.

1. Working capital

Working capital measures the difference between a construction company’s current assets and current liabilities. In other words, working capital highlights the financial prospects of a business in the short term. 

Businesses whose assets (like cash, accounts receivable, inventory, or materials) exceed the value of their liabilities (like wages, debts, vendor payments, or overhead costs) have working capital to use to maintain or grow. On the other hand, companies that have liabilities exceeding their assets lack working capital and may have trouble making payments and staying afloat. 

“Working capital evaluates the financial resources a company requires to operate the company,” notes Joshua Leyenhorst. “It’s something business owners need to consider over the course of the next year of operations. Many companies are only thinking in terms of the next month — the next two payroll periods or upcoming vendor payments — but stable companies typically have sufficient cash forecasts to project their working capital further out.”

Working capital is the lifeblood of a construction business. Because payment for construction jobs may be weeks or months after work is already completed, companies must manage their finances carefully to maintain cash reserves for taking on new jobs. 

Learn more: How to calculate working capital in construction

In certain situations, a company’s best option is to employ debt capital to finance certain expenditures, which helps keep working capital intact.

2. Debt capital

Debt capital is funding that a construction business acquires by borrowing, typically from banks or other lending institutions. By taking on debt, construction companies can defer payment on large purchases and use cash reserves for more immediate costs, like employee payroll or purchasing materials for a new job. 

“In construction, debt capital is often used to purchase so-called ‘capital assets,’ which would include equipment, vehicles, and real estate,” says Joshua Leyenhorst. “Often, the case is pretty strong to use debt financing for long-term assets, which frees up cash for operating expenses. However, companies need to be on the lookout for lender covenants or other restrictions that may make debt capital less attractive.”

Construction companies, just like individuals, need a credit history in order to borrow money. Frequently, companies start with a business credit card or another small line of credit that they pay back consistently in order to increase their creditworthiness. That way, as the need for credit increases, a business already has a demonstrated history of paying back debt. 

Read more: 7 Tips for Construction Businesses to Use Credit Cards Wisely

Debt capital can be vital for managing cash flow in construction. Debt payments spread out the cost of a large purchase over time, enabling a construction company to continue to take on new jobs and bring in revenue to tackle the debt while still maintaining enough cash to pay operating costs and grow. 

“Choosing debt financing is usually the right choice if your cash reserves can bring you a greater return than the debt’s interest cost,” notes Josh Leyenhorst. “For example, if you fund a $100,000 equipment purchase with a 5 percent interest loan, and your cash reserves will bring you a 10 percent return by taking on new jobs, it makes sense to finance the equipment purchase and use your cash to grow.”

Companies that have significant materials costs in order to take on new jobs may use debt capital to finance some or all of those costs. However, rising material costs and interest rates have affected construction businesses who lean on traditional lenders to cover these initial job costs. Alternative debt capital, like materials financing, presents the opportunity for businesses to defer the costs of materials without paying high-interest charges. 

3. Equity capital

Equity capital comes from private or public investors who typically purchase shares in the company. Publicly traded construction companies can secure a large influx of cash during an initial public offering (IPO). On the other hand, most construction companies looking for equity capital will instead turn to private investors. In exchange for a percentage of the company, private funds can provide equity capital that a construction business can use to start or grow operations.

“You can use equity for initial financing or expansion,” Josh Leyenhorst points out, “but many businesses will realize that equity capital is frequently more expensive than debt capital. That’s because shareholders typically want a much greater return than whatever current interest rates are.”

Large-scale construction companies, like those who build massive apartment buildings or commercial structures, are more likely to use equity capital to finance their projects. With rising costs for construction labor and materials, many equity firms must work with the expectation of thinner margins and smaller returns, which could make this financing option more viable for construction companies.

Read more: How to secure funding for a construction business

How much capital do you need?

Capital requirements for construction companies vary widely based on the type and scale of work they do. For example, subcontractors who have significant equipment or material costs may need greater access to debt or working capital than a general contractor who has fewer upfront costs to cover for their jobs. 

However, the best way to get a handle on capital requirements is through careful financial forecasting.

“Probably one of the most under-appreciated tools out there for construction business owners is a cash flow projection,” says Joshua Leyenhorst. “Cash flow is critical. If you can’t meet your payroll, can’t pay your vendors, then you’re going to run into problems. With a projection, you can see when your cash constraints are going to hit you, and you can react accordingly: Secure a line of credit, push on your accounts receivable, negotiate payment terms with your vendors.”

Learn more: How to build a cash flow projection

By understanding your cash flow and working capital requirements, you’ll be able to make more thoughtful decisions about taking on debt capital, raising money from shareholders, or cutting costs as needed. 

For businesses with long-term projects, this forecasting is even more critical. Construction companies that have high margins but low volume take on a greater amount of risk, as market conditions can change between the time a project is bid, when it breaks ground, and when it is completed. Using financial projections to consider both best-case and worst-case scenarios will help a company ensure it has enough capital to stay in business. 

“If you’re thinking about long-term projects,” says Josh Leyenhorst, “you may be looking out six months or more. These types of construction companies are often calculating an internal rate of return based on interest rates, but as interest rates rise, that internal rate of return can drop, and they may need supplemental funding to carry out the project.”

Construction companies that want to continue operations, grow their business, and weather economic storms need to have a firm understanding of their capital requirements. Business owners should take frequent stock of their assets, liabilities, and cash flow to foresee upcoming problems and adjust accordingly. With a clear understanding of capital — especially working capital — construction companies are poised to succeed and grow.

If you’re looking to start a roofing business, it’s the perfect time to flip the switch. Industry research notes that the US roofing industry consists of more than 80,000 businesses employing 250,000 people — and annual industry revenues exceed $50 billion. It’s an excellent time to consider starting a roofing company, as both the residential and commercial sectors are experiencing a wave of new construction, and that means opportunities for the roofing industry, which is expected to grow revenues by around 1% annually for the next five years. 

Moving from working as a roofing contractor to starting your own business may feel a bit dizzying, but it doesn’t have to be. Establishing a business legally is a straightforward process, and creating a plan for growth is exciting. As you get deeper into the process, you’ll get to tackle challenges with cash flow, marketing, hiring, and more. 

We worked together with Kyle Shirley, founder and owner of Sol Vista Roofing in Denver, to create a guide to start and grow a roofing business from the ground up. 

1. Lay the sheathing: Registration, licensing, and insurance

Handling the fundamentals is like putting down the deck at the start of a roofing project: It sets you up for success later. Starting a business starts with the legal and logistical nuts and bolts that get you ready for growth later on. 

Here are a few key steps to make sure you cover:

Once you’re registered, licensed, insured, and financially prepared, you’re ready to start thinking about how to grow your roofing business from the ground up. 

2. Make a clear business plan aimed at growth

The first step in growing your roofing business is to create a plan to grow. Start with your business plan – if you didn’t have a business plan when you started your roofing business, now would be a good time to write it down. 

“A strong business plan consists of thorough market research,” says Kyle Shirley. “You should look into the top players in your city or market, then perform a SWOT analysis to evaluate your strengths, weaknesses, opportunities, and threats. New businesses can leverage technology, automation, and lower overhead costs to compete with existing businesses. Your business plan lays out your strategy for breaking into the market and financial projections for the first five years, giving you a sense of how many jobs you need to take on to grow and scale.”

Below, we’ve listed some items your business plan should definitely include. 

Set goals for your business

Goals may include the revenue you want to generate over the next five years, the number of new jobs you will take on, or targets for hiring employees. The clearer you can be with your growth objectives, the easier it is to determine what resources you need in order to accomplish them. 

Get clear on your customers

Are you going to specialize in a specific niche, or diversify your client base? Will your business focus on residential customers or commercial roofing projects? The audience you are trying to reach — and the types of roofing jobs you want to take on — will determine your marketing strategy and hiring requirements, as well as other business decisions.

Analyze your competition

Once you’re clear on your goals and the types of roofing projects you’re going after, look at what your competition is doing. What kinds of jobs are they bidding on? How can you differentiate your company from existing businesses?  

Action item: Create a growth plan for your roofing company. Why it matters: Avoid the most dangerous business error of all: “Failing to plan is planning to fail.” 

3. Keep the cash flowing like water down a valley

Here’s a little-known fact about growing a roofing business: It can be incredibly cash-hungry. If you start growing without proper financial management, you will quickly find your company out of cash and in bankruptcy court. That’s not an overstatement: Cash flow is the number one reason why roofing contractors fail. 

“The construction business has a long cash conversion cycle,” notes Kyle Shirley, “so you need to go in with eyes wide open, understanding the average days sales outstanding (DSO) for your market — which you can find by reaching out to local or state roofing organizations. From there, you can track your accounts receivable, accounts payable, and overhead expenses to see your current cash flow. Even better, you can project your sales, labor costs, and materials costs further out to make sure that the revenue coming in is going to cover your costs.” 

In order to grow, a roofing company must proactively manage cash flow — or you’ll end up doing about as well as a roof without flashing. Since you’re a seasoned roofer, you know that payments can lag behind job completion — sometimes way behind. But your costs keep adding up, and you need cash on hand to continue hiring skilled roofers, buying materials and equipment, and taking on more or bigger roofing jobs. 

To grow your roofing business sustainably, it’s not enough to be a skilled roofer. You need to be a master of your cash flow. 

Becoming a successful business owner means knowing when to delegate and when to stay involved. When it comes to cash flow, it’s important to always have your finger on the pulse. 

Review your cash flow regularly

If you have an accountant, work with them to create a real-time view of your cash flow that you can check any time. Even without a dedicated accountant, you can use a cash flow forecast to predict your cash needs for the upcoming week, month, or year. Revise your projections to include actual expenses and revenue to make sure your model is accurate. 

Modern construction accounting software can take into account expenses, accounts payable, and accounts receivable to help you spot cash flow problems before they sink your business. 

WATCH: How to calculate cash flow for a construction project 

Use cash flow to inform your business decisions

When making financial decisions for your roofing business, operate with certainty rather than assumptions. Cash flow predictions and analytics are useful, but you’ll also want to lean on cash flow statements from past months and years that give a true picture of how your roofing business is doing. 

Beyond staying on top of cash flow as an owner, you’ll also want to make sure that you develop operational excellence among your team as your business grows: prompt invoicing, strong payment terms, and efforts to drive down costs where possible. 

Action item: Evaluate a recent cash flow statement and develop a real-time cash flow dashboard. Make it a priority to check in on your business cash flow at least weekly.Why it matters: If your business is cash flow negative, it doesn’t matter if you have significant revenue coming in down the line. Growing and maintaining your roofing business means having positive cash flow to expand your workforce and take on new jobs. 

4. Set your prices as carefully as you assemble a roof

While cash flow is critical for survival, profit is essential for growing a roofing business. Your profit is the money you will use to reinvest in the business for continued growth. Too many roofers fail to price their services correctly, either aiming too high to attract customers or too low to maintain profitability. 

Read more: The profit roadmap for contractors

For many business owners, nailing down the right pricing structure feels like a mystery, and some resort to simply copying competitors in hopes of success. But here’s the truth: Roofing businesses charge wildly different rates (from $3.50 to $10 per square foot in commercial roofing or $4.35 to $11 per square foot in residential roofing), and you need to figure out the price that will work for your business.

“Most contractors are not charging enough,” says Kyle Shirley. “Businesses tend to focus on their labor and material cost, but most people are not factoring in overhead. Some contractors I speak to think they don’t have any overhead, but even a solo contractor has to cover gas and insurance costs. Other overhead costs include marketing, technology (software, a website, etc.), and rent — though there are many more. And of course, your pricing also has to include a profit margin, because that profit is what you can re-invest in your business to grow.”

Your prices are going to depend on your region, whether you’re doing commercial or residential roofing work, and your specialization. Fortunately, getting the price right isn’t difficult, and you only have to follow one simple rule: The customer has to cover every cost. 

When you’re just doing individual roofing jobs, it’s easy to forget about the cost of doing business — but when you’re running a business, you need to remember that every job you take on needs to cover overhead as well. In addition to materials and labor for roofing jobs, you need to cover the cost of staff, offices, benefits, and more. 

Oh, and you do want to make a profit, right? Your pricing needs to take all of this into account. The average profit margin across the roofing industry is 7.2%, but you may adjust that number higher or lower depending on your business needs.

Keep reading: Contractor’s guide to profit and overhead

Action item: Take a look at your current hourly rate and billable hours, then determine whether they are actually covering your costs and working toward making a profit.Why it matters: Too many businesses fail because they undercharge or overprice their services. Make sure you know the real cost of running your roofing business and price accordingly. 

5. Hire & retain employees that form a great underlayment

Your employees are the face of your roofing business, which means that whoever you hire will represent your company in front of your customers. Successful business owners put their people first because a thriving team leads to a growing company. Roofers know that an underlayment helps protect the finished roof, so get team members who will help hold your company together.

“As a new business owner, you need employees who will build your reputation and earn a good review,” Kyle Shirley emphasizes. “When we started out, we did a lot of interviews and vetting. We tested our roofers out on different projects and jobs to make sure they would represent Sol Vista Roofing as professionals. We want customers to feel fantastic about the service they get so they’ll spread the word. That’s crucial when you’re just starting out.”

Update your benefits package to remain competitive

The more you can offer potential employees, the better employees you will attract. Strong health benefits, retirement plans, and leave policies may seem like high costs, but the value of productive employees can quickly outweigh the initial investment. Hiring, training, and developing an excellent team is the best investment you can make in growing your roofing business. 

When your employees consistently treat your customers with respect and demonstrate professional knowledge, growth comes naturally. Also, when you invest in your employees, they’re more likely to stick around, helping you to keep turnover low and engagement high. 

Provide training opportunities

Create onboarding procedures for every position that orients new employees to skills as well as company culture. While standardizing training for roofers is important, don’t forget about your back-office employees. Make sure your office staff have access to tools and courses that help them do their jobs more efficiently.

Training doesn’t have to be expensive. Levelset’s Payment Academy offers free courses on collections and credit, construction financial management, and more. 

Make it clear how employees can grow from the start. Rather than providing a job, open up a career path for everyone who works in your roofing business. Strong employees are attracted to growth opportunities, so provide incentives and promotions for performance to everyone who works for you.

Action item: Look at your processes for hiring, training, and development to identify areas for improvement. Why it matters: Employees are the single greatest asset of any roofing business. Treat them accordingly. 

6. Create clear policies and procedures for every aspect of your business

As your business grows, you’ll have less direct involvement in the day-to-day operations of the company. Too many business owners try to fight fires or manage every aspect of operations, but this is a recipe for burnout and stagnation.

“As you open your doors and take on new customers, document your policies and standard operating procedures,” says Kyle Shirley. “It doesn’t have to be pretty, but you need to write it down. Then, over time you can refine your procedures as you learn more about your business. How would you have handled that sale differently? Update the procedure. We have procedures for everything our company does, and those documents are visible to every one of our employees. If someone on my team asks how to get a measurement report for a roof, I point them to the procedure. As your business grows, you won’t have your hands in every aspect of operations, but good policies and procedures will make sure your team is consistent.”

Instead, you need to optimize your operations by building great processes, writing them down, and trusting your employees. Take all that you’ve learned about roofing, sales, and more—and add in knowledge from your employees. Use this accumulated experience to standardize how your team handles calls, evaluates customer creditworthiness, and manages repairs and installations. 

You need to have clear, written instructions for every company process. A policy serves three purposes: 

Trust your employees

Once you have standard procedures, let your employees follow them. Too many business owners try to micromanage, but this approach is rarely successful. Instead, refine your procedures over time and use ongoing training to empower your employees to handle every situation. 

In the end, your business is a collection of many different processes — from simple phone greetings to deciding whether to file a mechanics lien for non-payment. Having clear, unified processes for every aspect of your roofing business improves productivity and prevents knowledge from disappearing when employees leave your company. 

Action item: Identify processes that need standardization, write out clear instructions for those processes, and keep going until you have documentation to handle (nearly) every aspect of your roofing business.Why it matters: As you grow, you’ll have less direct control over your business. By crafting great processes, your wisdom stays in every aspect of the company even as your attention moves toward strategy rather than day-to-day operations. 

7. Execute a focused marketing and sales strategy

You can have the best roofers, office manager, and accountant on the planet, but if you don’t win jobs, your roofing business will not grow. Build a sales and marketing team that understands your target audience — and what gets them to say “yes” to the sale. 

“A sales procedure is one of the most important things you can have,” says Kyle Shirley. “And you want it to include everything. Our sales team parks on the street so they don’t block a homeowner’s driveway. We get to know the customer first. We walk around the property with the homeowner, and we gradually get a sense of what they need from us. After we do an inspection, we present our quote on site — and we explain the value that we bring, like our warranty. We don’t want to email that quote later, because we want a chance to discuss what we’re offering to the homeowner.”

On residential jobs, the homeowner is dealing with a potentially large outlay of funds and may be in a stressful situation—like a failing roof or the impending sale of their home. You want your sales staff to act with empathy and understanding. 

If your goal is to get more commercial or public jobs, you’ll need someone experienced in writing winning bids. Bidding a private commercial project can be different from bidding a government job — your team should understand the difference.    

“Commercial roofing sales is much more about building relationships over time,” notes Kyle Shirley. “You do good work with a developer and they begin to understand what you offer. You show them that you get their problem and you present solutions that will work for them. We’ll often send a video with our bids to explain our reasoning, which helps replicate that personal touch you usually get working on the residential side with homeowners.”

Both residential and commercial roofing companies need to be able to demonstrate their value to potential customers by addressing their needs and maintaining professionalism.

Growing a roofing business requires that customers know who you are and how to find you. Having a recognizable brand, strong online presence, and an easy-to-use website are vital for growth. 

“In terms of marketing, we do one-to-one outreach on the commercial side and lots of mass digital work on the residential side,” says Kyle Shirley. “We love Google pay-per-click (PPC) ads, and we’re active on social media platforms so that we can be visible in front of homeowners. You need to pay for a search engine optimization (SEO) person as well as some type of new media ads. But don’t discount legacy marketing: postcards, yard signs, door hangers. In some markets, going door to door after a storm is a viable tactic.”

According to Findstack, 72% of people use Google reviews to find businesses, and those with at least 200 reviews generate twice as much revenue on average. As a residential roofing business owner, you need to recognize that the majority of your marketing efforts must go toward optimizing for Google searches, which is where the majority of your potential customers are likely to find you when they’re looking for help with small service jobs or large remodeling projects.

Optimize your website

Either hire an outside agency or an internal specialist who can help you rank in Google for relevant search terms, like “roofer in X city.” You’ll want a strong domain name (www.yourdomain.com), well-written marketing copy, and perhaps even a regularly updated blog with information that supports potential customers. 

You can have your business show up in Google Reviews and on Google Maps by signing up for a business profile. 

Your website needs to work well on both computers and mobile devices, have your contact information readily available, and include a contact form that is easily accessible. When your potential customers find your website from a Google search, make it easy for them to get information about your business and reach out to you.

Feature recent roofing projects that highlight the types of projects you want to work on. Write up the project details, like problems you solved, your standards of cleanliness during construction, and the communication process with the project owner. 

Create a recognizable brand

Beyond optimizing your website and working toward better rankings in Google, you’ll want to make sure that you have a strong brand. Considering your business’ colors, logo, slogan, name, uniforms, trucks, and more can make marketing easier — and make it easier for your business to spread by word of mouth.  

If people know about your business, you’ll get more business. Once you’re an established name in your area, marketing becomes easier, but it never loses importance. Staying ahead of the competition means continually reaching out to potential customers and positioning your roofing business as the best solution to their needs.

4 techniques for closing sales

Here are four ways that strong roofing businesses get the sale for both repair work and new installations:

The majority of your customers are looking for you online, so making sure you stand out there is critical for business success. And it’s not just important for residential jobs — even developers and general contractors will look up your website as part of their prequalification process to determine your ability to complete a commercial roofing job. 

8. Know the laws that pertain to roofing businesses

Construction law is complex, and roofers have a lot of rules to follow. Failure to comply with building codes and other regulations can result in project delays, steep financial penalties, or a loss of your contractor license.

In addition to property rules, roofer’s licensing requirements, and other laws, you also need to be able to read and understand your construction contract thoroughly. If you’re not careful, you may end up agreeing to contract terms that delay payments or hurt your business financially. Someone at your company should review every contract — or even better, hire a legal team to do it for you.

9. Be the leader your company needs

Becoming a strong leader for your business is an important step if you want to grow. Business leaders with a clear vision, strong communication, and deft organization are able to overcome challenges and make wise decisions as they grow. 

Many roofing business owners started out as roofers or supervisors. The upside of that path is that you have excellent background knowledge about the industry that can inform decisions about materials, techniques, or sales. On the other hand, very few people are natural born leaders, and working as an individual roofer doesn’t always offer the opportunity to develop leadership skills. 

So start working on becoming a better leader right now. 

Always keep communicating

As the business owner, it’s easy to get stuck in your silo — but it’s a mistake. Your roofers, salespeople, customer service representatives, accountants, and more are at the front of your business and have information you need. Take time to ask three simple questions: What’s going well? What isn’t? How can I help you?

Stay open to feedback

It’s easy to get caught in a rut doing business the way you’ve always done it. Be open to new insights by meeting with other business owners, attending classes, joining professional groups, and getting feedback from members of your team. 

Never stop learning

Leadership skills develop over time and by incorporating insights from many sources. Listen to leadership podcasts, read leadership books, and take leadership classes with the intent to never stop growing as a leader.

The success of your roofing business starts with your own success as a leader. Build from your strengths and work on your weaknesses to develop into a business owner capable of growing and expanding where you want to be. 

Action item: Make a plan to become a better business leader this year.  Why it matters: Your roofing business’ success starts with you. Leadership skills take time to develop, and these skills will help you gain the insights you need for continuous growth. 

In order to perform construction work, many states require contractors to be “licensed and bonded.” What does that mean? Well, every state sets its own rules for contractor licensing, and contractors often must purchase a surety bond in order to legally practice their trade. In this article, we’ll explain the details of contractor license bonds, including what they are, who needs them, who they protect, and the process of obtaining one. 

Learn more: The complete guide to contractor licensing state-by-state

What is a contractor license bond? 

A contractor license bond, more simply known as a contractor bond, is a type of surety bond that guarantees a contractor will operate ethically and comply with local regulations and building codes. Many states, counties, and cities require that businesses purchase a contractor bond in order to qualify for a contractor license.

A contractor bond is different from other types of construction bonds because it provides broader protection to the public and is regulated by a licensing board. For example, contract bonds — like payment or performance bonds — are project-specific bonds that protect the property owner and subcontractors. When the project is completed successfully, the bond expires. A contractor license bond, on the other hand, “follows” the contractor to every job they work on. 

A contractor bond is a three-party agreement

The three parties involved in a contractor license bond are the obligee, the principal, and the surety company.

The obligee is the governing entity that requires the surety bond in order for a contractor to be licensed. A few examples of obligees include the California Contractors State License Board, the Nevada State Contractors Board, and the Oregon Construction Contractors Board.

The principal is the contractor required to obtain the bond. In the event of a valid claim against the license bond, the principal must reimburse the surety company for any payouts. 

The surety company is a third-party entity issuing the bond. They guarantee payment to those financially harmed when things go awry because of a contractor’s failure to uphold obligations. The surety company is responsible for requesting reimbursement from the contractor after a claim payout has been made on the contractor’s behalf.

Do all contractors need a license bond?

Each state (and sometimes individual municipalities) sets its own licensing and bonding requirements, so different contractors may need a license bond in different locations. As a result, a variety of types of contractors may be required to hold a license bond, including GCs, roofers, electricians, plumbers, pool contractors, and HVAC contractors, just to name a few. 

Here are a few examples:

1. In California, all contractors must hold a contractor license bond. Two additional bonds may be required: 

2. In Nevada, contractors of all trades are required to hold a bond. If working on pools and spas, a residential pool and spa license bond must be filed in addition to the contractor license bond.

3. In Oregon, contractor bond requirements are determined by whether the contractor is doing residential or commercial work (or a combination) in addition to the contractor’s trade being general, specialty, or limited. If a contractor is doing both residential and commercial work, they must hold two surety bonds. 

4. In Texas, contractor bonds are enforced at the city or county level. Some cities and counties have an all-encompassing contractor license bond while others have requirements specific to the type of work being performed, such as those performing work in a right of way or other permit work within the municipality. 

Because each state varies so significantly, it’s important to understand the city, county, and state requirements to ensure proper coverage. 

How much does a license bond cost?

The price of a contractor license bond generally ranges from 0.5%-10% of the bond amount. Sureties use a variety of factors to determine the bond price, including the contractor’s credit and financial history, number of years in business, and the bond limit. 

In Oregon, for example, the limit for a residential general contractor is $20,000, so a contractor with excellent credit and several years in business could pay around $100 (0.5%) for a one-year term. 

For the $50,000 Oregon commercial specialty level 1 license, bond rates start at around $250 for one year. However, surety companies evaluate each state’s requirements individually so rates for similar limits in other states may be different should there be a greater risk present.

What does a contractor license bond cover?

Although contractors are the ones mandated to obtain this coverage, they are not the ones protected (that’s what general liability insurance is for). Instead, a contractor bond protects the public, employees, subcontractors, suppliers, and the obligee.

A contractor’s failure to uphold contractual duties and comply with regulations could result in a bond claim to recover damages. 

Clients can file a claim for:

Subcontractors, suppliers, and other vendors can file a claim for:

Obligees can file a claim for: 

Note: These scenarios don’t always lead to a claim. Sometimes the licensing board suspends the contractor’s license or takes some other disciplinary action as a first step. Before a claim is pursued, the obligee often gives the contractor a chance to rectify the situation or the surety company encourages the contractor to work things out with the claimant. 

Contractor bond claim process

The contractor bond claim process is pretty straightforward. A bond claim can be filed by anyone who has been financially harmed by the obligee, e.g. the clients, the subcontractors, and the obligee. 

Depending on the state, the claim may be made to the obligee or directly to the surety company. If a subcontractor, employee, supplier, or client files a claim with the obligee, the obligee may do their own investigation prior to requesting a payout from the surety company. However, if the obligee deems it legitimate, they will notify the surety. 

Once a claim reaches the surety company, whether directly from the client/subcontractor or from the obligee, a claim handler reviews the details and begins an investigation to confirm the claim’s validity. 

If justified, a payout is made to the claimant (person or entity pursuing the claim) up to the bond’s limit. Lastly, the principal must reimburse the surety company for the full claim amount; this is because surety bonds are unlike insurance, and claims are only paid out for intentional and fixable issues the contractor fails and/or refuses to address.

Read more: 4 steps after filing a bond claim

How to get a license bond

First, make sure you understand the city, county, or state licensing requirements. From there, find a reliable surety company and fill out a bond application. 

Surety companies use a variety of underwriting criteria, including the applicant’s personal credit score, the number of years in business, and the bond limit (maximum amount of money that the surety will guarantee payment for a claim payout). 

In some situations, a review of the contractor’s business and/or personal finances may be necessary. The underwriting process allows sureties to determine the risk associated with each applicant and their ability to pay the surety company back in the event of a claim. 

After purchasing the bond, the contractor must file their license bond with the obligee. Each obligee has different requirements, some of which include electronic filing, an emailed copy of the bond, and the original signed and sealed bond (most common).

Most contractor bonds are renewed on an annual basis, but some surety companies have multi-year terms available. Knowing the bond renewal date helps with compliance and ensures no lapse in coverage.

If you’re looking to start a painting business, it’s time to get rolling — or brushing, or spraying. Industry research reveals that the US painting industry includes over 255,000 businesses with total annual revenues exceeding $35 billion. It’s an excellent time to consider starting a painting company, as both the residential and commercial sectors are experiencing a wave of new construction, and that means opportunities for painters. 

Moving from working as a painter to starting your own business may seem like a daunting process, but it doesn’t have to be. Establishing a business legally is a straightforward process, and creating a plan for growth is exciting. As you get deeper into the process, you’ll get to tackle challenges with cash flow, marketing, hiring, and more. 

We’ve covered everything you need to know in our guide, so keep reading to get a handle on the key steps to take when starting a business as a painter. 

1. Start right by registering, licensing, and insuring your business

Handling the fundamentals is like putting on a coat of primer: It sets you up for success later. Starting a business starts with the legal and logistical nuts and bolts that get you ready for growth later on. 

Here are a few key steps to make sure you cover:

Once your business is registered, licensed, insured, and financially prepared, you’re ready to start thinking about how to grow your business from the ground up. 

2. Create a plan for growth

The first step in growing your painting business is to create a growth plan. Start with your business plan – if you didn’t have a business plan when you started your painter’s business, now would be a good time to write it down. Below, we’ve listed some items your business plan should definitely include. 

Set goals for your business

Goals may include the revenue you want to generate over the next five years, the number of new jobs you will take on, or targets for hiring employees. The clearer you can be with your growth objectives, the easier it is to determine what resources you need in order to accomplish them. 

Get clear on your customers

Are you going to specialize in a specific niche, or diversify your client base? Will your business focus on residential customers or commercial painting projects? The audience you are trying to reach — and the types of painting jobs you want to take on — will determine your marketing strategy and hiring requirements, as well as other business decisions.

Analyze your competition

Once you’re clear on your goals and the types of painting projects you’re going after, look at what your competition is doing. What kinds of jobs are they bidding on? How can you differentiate your company from existing businesses?  

Action item: Create a growth plan for your painting company. Why it matters: Avoid the most dangerous business error of all: “Failing to plan is planning to fail.” 

3. Keep the cash flowing as smoothly as your paint

Here’s a little-known fact about growing a painting business: It can be incredibly cash-hungry. If you start growing without proper financial management, you will quickly find your company out of cash and in bankruptcy court. That’s not an overstatement: Cash flow is the number one reason why painting contractors fail. 

In order to grow, a painting company must proactively manage cash flow — or you’ll end up doing about as well as a clogged paint sprayer. Since you’re a seasoned painter, you know that payments can lag behind job completion—sometimes way behind. But your costs keep adding up, and you need cash on hand to continue hiring skilled painters, buying paint and equipment, and taking on more or bigger painting jobs. 

To grow your painting business sustainably, it’s not enough to be a Master Painter, you need to be a master of your cash flow. 

Becoming a successful business owner means knowing when to delegate and when to stay involved. When it comes to cash flow, it’s important to always have your finger on the pulse. 

Review your cash flow regularly

If you have an accountant, work with them to create a real-time view of your cash flow that you can check at any time. Even without a dedicated accountant, you can use a cash flow forecast to predict your cash needs for the upcoming week, month, or year. Revise your projections to include actual expenses and revenue to make sure your model is accurate. 

Modern construction accounting software can take into account expenses, accounts payable, and accounts receivable to help you spot cash flow problems before they sink your business. 

WATCH: How to calculate cash flow for a construction project 

Use cash flow to inform your business decisions

When making financial decisions for your painting business, operate with certainty rather than assumptions. Cash flow predictions and analytics are useful, but you’ll also want to lean on cash flow statements from past months and years that give a true picture of how your business is doing. 

Beyond staying on top of cash flow as an owner, you’ll also want to make sure that you develop operational excellence among your team as your business grows: prompt invoicing, strong payment terms, and efforts to drive down costs where possible. 

Action item: Evaluate a recent cash flow statement and develop a real-time cash flow dashboard. Make it a priority to check in on your business cash flow at least weekly.Why it matters: If your business is cash flow negative, it doesn’t matter if you have significant revenue coming in down the line. Growing and maintaining your painting business means having positive cash flow to expand your workforce and take on new jobs. 

4. Set pricing carefully — don’t just bump it 

While cash flow is critical for survival, profit is essential for growing a painting business. Your profit is the money you will use to reinvest in the business for continued growth. Too many painters fail to price their services correctly, either aiming too high to attract customers or too low to maintain profitability. 

Read more: The profit roadmap for contractors

For many business owners, nailing down the right pricing structure feels like a mystery, and some resort to simply copying competitors in hopes of success. But here’s the truth: Painting businesses charge wildly different rates ($2 to $5 per square foot for residential painters or $2 to $6 per square foot for commercial painters), and you need to figure out the price that will work for your business.

Your prices are going to depend on your region, whether you’re doing commercial or residential paint work, and your specialization. Fortunately, getting the price right isn’t difficult, and you only have to follow one simple rule: The customer has to cover every cost. 

When you’re just doing individual jobs, it’s easy to forget about the cost of doing business — but when you’re running a business, you need to remember that every job you take on needs to cover overhead as well. In addition to materials and labor for painting a new or remodeled building, you need to cover the cost of staff, offices, benefits, and more. 

Oh, and you do want to make a profit, right? Your pricing needs to take all of this into account. The average profit margin across the painting industry is around 8%, but you may adjust that number higher or lower depending on your business needs.

Keep reading: Contractor’s guide to profit and overhead

Action item: Take a look at your current hourly rate and billable hours, then determine whether they are actually covering your costs and working toward making a profit.Why it matters: Too many businesses fail because they undercharge or overprice their services. Make sure you know the real cost of running your painting business and price accordingly. 

5. Hire & retain employees that act as catalysts 

Your employees are the face of your painting business, which means that whoever you hire will represent your company in front of your customers. Successful business owners put their people first because a thriving team leads to a growing company. Just like paint has catalysts to improve its finish, you want to hire catalysts that improve the quality of your company’s offerings.

Update your benefits package to remain competitive

The more you can offer potential employees, the better employees you will attract. Strong health benefits, retirement plans, and leave policies may seem like high costs, but the value of productive employees can quickly outweigh the initial investment. Hiring, training, and developing an excellent team is the best investment you can make in growing your painting business. 

When your employees consistently treat your customers with respect and demonstrate professional knowledge, growth comes naturally. Also, when you invest in your employees, they’re more likely to stick around, helping you to keep turnover low and engagement high. 

Provide training opportunities

Create onboarding procedures for every position that orients new employees to skills as well as company culture. While standardizing training for painters is important, don’t forget about your back-office employees. Make sure your office staff has access to tools and courses that help them do their jobs more efficiently.

Training doesn’t have to be expensive. Levelset’s Payment Academy offers free courses on collections and credit, construction financial management, and more. 

Make it clear how employees can grow from the start. Rather than providing a job, open up a career path for everyone who works in your painting business. Strong employees are attracted to growth opportunities, so provide incentives and promotions for performance to everyone who works for you.

Action item: Look at your processes for hiring, training, and development to identify areas for improvement. Why it matters: Employees are the single greatest asset of any painting business. Treat them accordingly. 

6. Keep consistent policies and procedures across the board

As your business grows, you’ll have less direct involvement in the day-to-day operations of the company. Too many business owners try to fight fires or manage every aspect of operations, but this is a recipe for burnout and stagnation.

Instead, you need to optimize your operations by building great processes, writing them down, and trusting your employees. Take all that you’ve learned about painting, sales, and more—and add in knowledge from your employees. Use this accumulated experience to standardize how your team handles calls, evaluates customer creditworthiness, and manages painting projects. 

You need to have clear, written instructions for every company process. A policy serves three purposes: 

Trust your employees

Once you have standard procedures, let your employees follow them. Too many business owners try to micromanage, but this approach is rarely successful. Instead, refine your procedures over time and use ongoing training to empower your employees to handle every situation. 

In the end, your business is a collection of many different processes—from simple phone greetings to deciding whether to file a mechanics lien for non-payment. Having clear, unified processes for every aspect of your painting business improves productivity and prevents knowledge from disappearing when employees leave your company. 

Action item: Identify processes that need standardization, write out clear instructions for those processes, and keep going until you have documentation to handle (nearly) every aspect of your painting business.Why it matters: As you grow, you’ll have less direct control over your business. By crafting great processes, your wisdom stays in every aspect of the company even as your attention moves toward strategy rather than day-to-day operations. 

7. Focus on marketing & sales to increase your coverage

You can have the best painters, office manager, and accountant on the planet, but if you don’t win jobs, your painting business will not grow. Build a sales and marketing team that understands your target audience – and what gets them to say “yes” to the sale. 

On residential jobs, the homeowner is dealing with a potentially large outlay of funds and may be in a stressful situation — like a major home renovation or preparing for a sale. You want your sales staff to act with empathy and understanding. 

If your goal is to get more commercial or public jobs, you’ll need someone experienced in writing winning bids. Bidding on a private commercial project can be different from bidding on a government job – your team should understand the difference.    

Both residential and commercial painting companies need to be able to demonstrate their value to potential customers by addressing their needs and maintaining professionalism.

Growing a painting business requires that customers know who you are and how to find you. Having a recognizable brand, a strong online presence, and an easy-to-use website are vital for growth. 

According to Findstack, 72% of people use Google reviews to find businesses, and those with at least 200 reviews generate twice as much revenue on average. As a residential painting business owner, you need to recognize that the majority of your marketing efforts must go toward optimizing for Google searches, which is where the majority of your potential customers are likely to find you when they’re looking for help with large and small painting jobs for the interior and exterior of their homes.

Optimize your website

Either hire an outside agency or an internal specialist who can help you rank in Google for relevant search terms, like “painter in X city.” You’ll want a strong domain name (www.yourdomain.com), well-written marketing copy, and perhaps even a regularly updated blog with information that supports potential customers. 

You can have your business show up in Google Reviews and on Google Maps by signing up for a business profile. 

Your website needs to work well on both computers and mobile devices, have your contact information readily available, and include a contact form that is easily accessible. When your potential customers find your website from a Google search, make it easy for them to get information about your business and reach out to you.

Feature recent painting projects that highlight the types of projects you want to work on. Write up the project details, like problems you solved, your standards of cleanliness during construction, and the communication process with the project owner. 

Create a recognizable brand

Beyond optimizing your website and working toward better rankings on Google, you’ll want to make sure that you have a strong brand. Considering your business’ colors, logo, slogan, name, uniforms, trucks, and more can make marketing easier—and make it easier for your business to spread by word of mouth.  

If people know about your business, you’ll get more business. Once you’re an established name in your area, marketing becomes easier, but it never loses importance. Staying ahead of the competition means continually reaching out to potential customers and positioning your painting business as the best solution to their needs.

4 techniques for closing sales

Here are four ways that strong painting businesses get the sale for both repair work and new installations:

The majority of your customers are looking for you online, so making sure you stand out there is critical for business success. And it’s not just important for residential jobs — even developers and general contractors will look up your website as part of their prequalification process to determine your ability to complete a commercial job. 

8. Know the laws that apply to your painting business

Construction law is complex, and painting contractors have a lot of rules to follow. Failure to comply with building codes and other regulations can result in project delays, steep financial penalties, or a loss of your contractor license.

In addition to property rules, painter’s licensing requirements, and other laws, you also need to be able to read and understand your construction contract thoroughly. If you’re not careful, you may end up agreeing to contract terms that delay payments or hurt your business financially. Someone at your company should review every contract — even better, hire a legal team to do it for you.

9. Become a more durable leader

Becoming a strong leader for your business is an important step if you want to grow. Business leaders with a clear vision, strong communication, and deft organization are able to overcome challenges and make wise decisions as they grow. 

Many painting business owners started out as painters or supervisors. The upside of that path is that you have excellent background knowledge about the industry that can inform decisions about materials, techniques, or sales. On the other hand, very few people are natural-born leaders, and working as an individual painter doesn’t always offer the opportunity to develop leadership skills. 

So start working on becoming a better leader right now. 

Always keep communicating

As the business owner, it’s easy to get stuck in your silo — but it’s a mistake. Your painters, salespeople, customer service representatives, accountants, and more are at the front of your business and have information you need. Take time to ask three simple questions: What’s going well? What isn’t? How can I help you?

Stay open to feedback

It’s easy to get caught in a rut doing business the way you’ve always done it. Be open to new insights by meeting with other business owners, attending classes, joining professional groups, and getting feedback from members of your team. 

Never stop learning

Leadership skills develop over time and by incorporating insights from many sources. Listen to leadership podcasts, read leadership books, and take leadership classes with the intent to never stop growing as a leader.

The success of your business starts with your own success as a leader. Build from your strengths and work on your weaknesses to develop into a business owner capable of growing and expanding where you want to be. 

Action item: Make a plan to become a better business leader this year.  Why it matters: Your painting business’ success starts with you. Leadership skills take time to develop, and these skills will help you gain the insights you need for continuous growth. 

If you’re looking to start a plumbing business, it’s the perfect time to get with the flow. Industry research shows that the US plumbing industry includes over 130,00 businesses (and more than 500,000 employees) with total annual revenues exceeding $130 billion. It’s an excellent time to consider starting a plumbing company, as both the residential and commercial sectors are experiencing a wave of new construction, and that means opportunities for plumbing companies, which are expected to grow revenues by more than 1% annually for the next five years. 

Moving from working as a plumber to starting your own business may seem like a lot of (water) pressure, but it doesn’t have to be. Establishing a business legally is a straightforward process, and creating a plan for growth is exciting. As you get deeper into the process, you’ll get to tackle challenges with cash flow, marketing, hiring, and more. 

We’ve covered everything you need to know in our guide, so keep reading to get a handle on the key steps to take when starting a business as a plumber. 

1. Get registered, licensed, and insured before anything else

Handling the fundamentals is like putting together a pipe diagram: It sets you up for success later. Starting a business starts with the legal and logistical nuts and bolts that get you ready for growth later on. 

Here are a few key steps to make sure you cover:

Once you’re registered, licensed, insured, and financially prepared, you’re ready to start thinking about how to grow your plumbing business from the ground up. 

2. Make a growth plan to stay focused on your goals

The first step in growing your plumbing business is to create a plan to grow. Start with your business plan – if you didn’t have a business plan when you started your plumber’s business, now would be a good time to write it down. Below, we’ve listed some items your business plan should definitely include. 

Set goals for your business

Goals may include the revenue you want to generate over the next five years, the number of new jobs you will take on, or targets for hiring employees. The clearer you can be with your growth objectives, the easier it is to determine what resources you need in order to accomplish them. 

Get clear on your customers

Are you going to specialize in a specific niche, or diversify your client base? Will your business focus on residential customers or commercial plumbing projects? The audience you are trying to reach — and the types of plumbing jobs you want to take on — will determine your marketing strategy and hiring requirements, as well as other business decisions.

Analyze your competition

Once you’re clear on your goals and the types of plumbing projects you’re going after, look at what your competition is doing. What kinds of jobs are they bidding on? How can you differentiate your company from existing businesses?  

Action item: Create a growth plan for your plumbing company. Why it matters: Avoid the most dangerous business error of all: “Failing to plan is planning to fail.” 

3. Keep the cash flowing through your financial pipes

Here’s a little-known fact about growing a plumbing business: It can be incredibly cash-hungry. If you start growing without proper financial management, you will quickly find your company out of cash and in bankruptcy court. That’s not an overstatement: Cash flow is the number one reason why plumbing contractors fail. 

In order to grow, a plumbing company must proactively manage cash flow. Since you’re a seasoned plumber, you know that payments can lag behind job completion — sometimes way behind. But your costs keep adding up, and you need cash on hand to continue hiring skilled plumbers, buying materials and equipment, and taking on more or bigger plumbing jobs. 

To grow your plumbing business sustainably, it’s not enough to be a Master Plumber, you need to be a master of your cash flow. 

Becoming a successful business owner means knowing when to delegate and when to stay involved. When it comes to cash flow, it’s important to always have your finger on the pulse. 

Review your cash flow regularly

If you have an accountant, work with them to create a real-time view of your cash flow that you can check at any time. Even without a dedicated accountant, you can use a cash flow forecast to predict your cash needs for the upcoming week, month, or year. Revise your projections to include actual expenses and revenue to make sure your model is accurate. 

Modern construction accounting software can take into account expenses, accounts payable, and accounts receivable to help you spot cash flow problems before they sink your business. 

WATCH: How to calculate cash flow for a construction project 

Use cash flow to inform your business decisions

When making financial decisions for your plumbing business, operate with certainty rather than assumptions. Cash flow predictions and analytics are useful, but you’ll also want to lean on cash flow statements from past months and years that give a true picture of how your plumbing business is doing. 

Beyond staying on top of cash flow as an owner, you’ll also want to make sure that you develop operational excellence among your team as your business grows: prompt invoicing, strong payment terms, and efforts to drive down costs where possible. 

Action item: Evaluate a recent cash flow statement and develop a real-time cash flow dashboard. Make it a priority to check in on your business cash flow at least weekly.Why it matters: If your business is cash flow negative, it doesn’t matter if you have significant revenue coming in down the line. Growing and maintaining your plumbing business means having positive cash flow to expand your workforce and take on new jobs. 

4. Set pricing carefully — don’t get caught in the ‘P’ trap

While cash flow is critical for survival, profit is essential for growing a plumbing business. Your profit is the money you will use to reinvest in the business for continued growth. Too many plumbers fail to price their services correctly, either aiming too high to attract customers or too low to maintain profitability. 

Read more: The profit roadmap for contractors

For many business owners, nailing down the right pricing structure feels like a mystery, and some resort to simply copying competitors in hopes of success. But here’s the truth: Plumbing businesses charge wildly different rates (from $45 to $200 or more per hour), and you need to figure out the price that will work for your business.

Your prices are going to depend on your region, whether you’re doing commercial or residential plumbing work, and your specialization. Fortunately, getting the price right isn’t difficult, and you only have to follow one simple rule: The customer has to cover every cost. To avoid getting caught in the “P” trap (without any profitability), you need to think carefully about overhead. 

When you’re just doing individual jobs, it’s easy to forget about the cost of doing business — but when you’re running a business, you need to remember that every job you take on needs to cover overhead as well. In addition to materials and labor for plumbing jobs, you need to cover the cost of staff, offices, benefits, and more. 

Oh, and you do want to make a profit, right? Your pricing needs to take all of this into account. The average profit margin across the plumbing industry is around 5%, but you may adjust that number higher or lower depending on your business needs.

Keep reading: Contractor’s guide to profit and overhead

Action item: Take a look at your current hourly rate and billable hours, then determine whether they are actually covering your costs and working toward making a profit.Why it matters: Too many businesses fail because they undercharge or overprice their services. Make sure you know the real cost of running your plumbing business and price accordingly. 

5. Hire & retain employees that lay the groundwork

Your employees are the face of your plumbing business, which means that whoever you hire will represent your company in front of your customers. Successful business owners put their people first because a thriving team leads to a growing company. Plumbers know that pipes are the groundwork of any successful building project, so find employees that will build a strong foundation for your business.

Update your benefits package to remain competitive

The more you can offer potential employees, the better employees you will attract. Strong health benefits, retirement plans, and leave policies may seem like high costs, but the value of productive employees can quickly outweigh the initial investment. Hiring, training, and developing an excellent team is the best investment you can make in growing your plumbing business. 

When your employees consistently treat your customers with respect and demonstrate professional knowledge, growth comes naturally. Also, when you invest in your employees, they’re more likely to stick around, helping you to keep turnover low and engagement high. 

Provide training opportunities

Create onboarding procedures for every position that orients new employees to skills as well as company culture. While standardizing training for plumbers is important, don’t forget about your back-office employees. Make sure your office staff has access to tools and courses that help them do their jobs more efficiently.

Training doesn’t have to be expensive. Levelset’s Payment Academy offers free courses on collections and credit, construction financial management, and more. 

Make it clear how employees can grow from the start. Rather than providing a job, open up a career path for everyone who works in your plumbing business. Strong employees are attracted to growth opportunities, so provide incentives and promotions for performance to everyone who works for you.

Action item: Look at your processes for hiring, training, and development to identify areas for improvement. Why it matters: Employees are the single greatest asset of any plumbing business. Treat them accordingly. 

6. Build consistent policies and procedures for your business

As your business grows, you’ll have less direct involvement in the day-to-day operations of the company. Too many business owners try to fight fires or manage every aspect of operations, but this is a recipe for burnout and stagnation.

Instead, you need to optimize your operations by building great processes, writing them down, and trusting your employees. Take all that you’ve learned about plumbing, sales, and more — and add in knowledge from your employees. Use this accumulated experience to standardize how your team handles calls, evaluates customer creditworthiness, and manages repairs and installations. 

You need to have clear, written instructions for every company process. A policy serves three purposes: 

Trust your employees

Once you have standard procedures, let your employees follow them. Too many business owners try to micromanage, but this approach is rarely successful. Instead, refine your procedures over time and use ongoing training to empower your employees to handle every situation. 

In the end, your business is a collection of many different processes — from simple phone greetings to deciding whether to file a mechanics lien for non-payment. Having clear, unified processes for every aspect of your plumbing business improves productivity and prevents knowledge from disappearing when employees leave your company. 

Action item: Identify processes that need standardization, write out clear instructions for those processes, and keep going until you have documentation to handle (nearly) every aspect of your plumbing business.Why it matters: As you grow, you’ll have less direct control over your business. By crafting great processes, your wisdom stays in every aspect of the company even as your attention moves toward strategy rather than day-to-day operations. 

7. Implement a high-efficiency marketing & sales strategy

You can have the best plumbers, office manager, and accountant on the planet, but if you don’t win jobs, your plumbing business will not grow. Build a sales and marketing team that understands your target audience — and what gets them to say “yes” to the sale. 

On residential jobs, the homeowner is dealing with a potentially large outlay of funds and may be in a stressful situation — like a major home renovation or a burst pipe. You want your sales staff to act with empathy and understanding. 

If your goal is to get more commercial or public jobs, you’ll need someone experienced in writing winning bids. Bidding on a private commercial project can be different from bidding on a government job — your team should understand the difference.    

Both residential and commercial plumbing companies need to be able to demonstrate their value to potential customers by addressing their needs and maintaining professionalism.

Growing a plumbing business requires that customers know who you are and how to find you. Having a recognizable brand, a strong online presence, and an easy-to-use website are all vital for growth. 

According to Findstack, 72% of people use Google reviews to find businesses, and those with at least 200 reviews generate twice as much revenue on average. As a residential plumbing business owner, you need to recognize that the majority of your marketing efforts must go toward optimizing for Google searches, which is where the majority of your potential customers are likely to find you when they’re looking for help with small service jobs or large remodeling projects.

Optimize your website

Either hire an outside agency or an internal specialist who can help you rank in Google for relevant search terms, like “plumber in X city.” You’ll want a strong domain name (www.yourdomain.com), well-written marketing copy, and perhaps even a regularly updated blog with information that supports potential customers. 

You can have your business show up in Google Reviews and on Google Maps by signing up for a business profile. 

Your website needs to work well on both computers and mobile devices, have your contact information readily available, and include a contact form that is easily accessible. When your potential customers find your website from a Google search, make it easy for them to get information about your business and reach out to you.

Feature recent plumbing projects that highlight the types of projects you want to work on. Write up the project details, like problems you solved, your standards of cleanliness during construction, and the communication process with the project owner. 

Create a recognizable brand

Beyond optimizing your website and working toward better rankings on Google, you’ll want to make sure that you have a strong brand. Considering your business’ colors, logo, slogan, name, uniforms, trucks, and more can make marketing easier — and make it easier for your business to spread by word of mouth.  

If people know about your business, you’ll get more business. Once you’re an established name in your area, marketing becomes easier, but it never loses importance. Staying ahead of the competition means continually reaching out to potential customers and positioning your plumbing business as the best solution to their needs.

4 techniques for closing sales

Here are four ways that strong plumbing businesses get the sale for both repair work and new installations:

The majority of your customers are looking for you online, so making sure you stand out there is critical for business success. And it’s not just important for residential jobs — even developers and general contractors will look up your website as part of their prequalification process to determine your ability to complete a commercial plumbing job. 

8. Know the laws that apply to your plumbing business

Construction law is complex, and plumbers have a lot of rules to follow. Failure to comply with building codes and other regulations can result in project delays, steep financial penalties, or a loss of your contractor license.

In addition to property rules, plumber’s licensing requirements, and other laws, you also need to be able to read and understand your construction contract thoroughly. If you’re not careful, you may end up agreeing to contract terms that delay payments or hurt your business financially. Someone at your company should review every contract — even better, hire a legal team to do it for you.

9. Become a more capable leader

Becoming a strong leader for your business is an important step if you want to grow. Business leaders with a clear vision, strong communication, and deft organization are able to overcome challenges and make wise decisions as they grow. 

Many plumbing business owners started out as plumbers or supervisors. The upside of that path is that you have excellent background knowledge about the industry that can inform decisions about materials, techniques, or sales. On the other hand, very few people are natural-born leaders, and working as an individual plumber doesn’t always offer the opportunity to develop leadership skills. 

So start working on becoming a better leader right now. 

Always keep communicating

As the business owner, it’s easy to get stuck in your silo—but it’s a mistake. Your plumbers, salespeople, customer service representatives, accountants, and more are at the front of your business and have the information you need. Take time to ask three simple questions: What’s going well? What isn’t? How can I help you?

Stay open to feedback

It’s easy to get caught in a rut doing business the way you’ve always done it. Be open to new insights by meeting with other business owners, attending classes, joining professional groups, and getting feedback from members of your team. 

Never stop learning

Leadership skills develop over time and by incorporating insights from many sources. Listen to leadership podcasts, read leadership books, and take leadership classes with the intent to never stop growing as a leader.

The success of your business starts with your own success as a leader. Build from your strengths and work on your weaknesses to develop into a business owner capable of growing and expanding where you want to be. 

Action item: Make a plan to become a better business leader this year.  Why it matters: Your plumbing business’ success starts with you. Leadership skills take time to develop, and these skills will help you gain the insights you need for continuous growth. 

With the announcement of its new budget for 2022-2023, Ohio is taking a huge step forward with state-funded development and infrastructure buildup. Governor Mike DeWine has approved a staggering $3.5 billion in funding for community projects across the state both in the public and private sectors, including the new Ohio Building Demolition and Site Revitalization Program.

A large amount of that funding is set to be allocated to individual counties and state agencies, meaning that keeping an eye on what opportunities are headed where can help contractors who are hoping to maximize their opportunities.

Demolition and site revitalization at the heart of improvements and funding

$500 million of the newly-announced funding is for various development programs, including the aforementioned Building Demolition and Site Revitalization Program. This program will include $150 million for the demolition of vacant or abandoned commercial or residential buildings, with all 88 counties being eligible for grants to pursue demolition projects. The first round of funding ended up with $42.1 million in allocations to 87 of the state’s 88 counties, with the rest to be released on a “first-come, first-served” basis.

As law firm Tucker Ellis LLP observed, the state of Ohio’s 2022-2023 budget dedicates a historical amount for brownfield funding — alongside the $150 million intended for demolition projects, the budget further allocates $350 million total for the investigation, cleanup, and revitalization of other brownfield sites.

A number of contractors are already taking advantage of the situation and advertising their availability for demolition projects.

Public and private projects receiving funding

The budget also includes allocations for a number of public works opportunities that could beneficial to contractors in the state:

State funding isn’t only going to be directed to public works projects, as private entity Intel is likely going to receive around $1.1 billion from the budget in order to fund major new construction projects in the state. 

See Intel’s Ohio Semiconductor Factories: Project Guide for Subcontractors

“Ohio is going to be benefitted in many ways,” DeWine said of the state’s intended support of the company. “Intel tells us they have Ohio residents who work at Intel and they’re dying to come back…There will be a number of Ohioans who will be hired.”

Ohio grant funding: How to apply & important contacts

Clean Ohio Program

The Clean Ohio program — which has served as a funding source mainly focused on environmental improvements, specifically — will continue to operate alongside the newer programs, though on a smaller basis.

Entities can apply for Clean Ohio grants via the state’s public works agency.

Building Demolition and Site Revitalization Program

It’s important for contractors to note that funding for this program is going to be claimed individually by county officials, making understanding of county needs and communication with county officials a must for any contractor hoping to take on local demolition needs in the state.

Though it isn’t required during the process for applying for further funding from the Building Demolition and Site Revitalization Program, counties may also optionally look to establish a subrecipient agreement with contractors prior to submitting an application (and thus prior to funding being awarded), reinforcing the importance of up-front communication.

You can view the Ohio Department of Development’s guidelines for the Building Demolition and Site Revitalization Program here.

Any questions related to the Building Demolition and Site Revitalization Program can be directed to Ohio’s Development Public Information Officer Megan Nagy at megan.nagy@development.ohio.gov. 

Questions about any of the individual grants can be directed to the entity receiving the funding. If you’re wondering how much funding your county has been allotted in the first round of distribution, see a complete list here.

There is no shortage of work in the construction industry right now. Yet, upfront costs are barriers for many specialty contractors interested in taking on more significant projects but face the challenge of waiting on payment from past jobs.

Delayed payment is felt by nearly 90% of contractors, according to Levelset’s 2021 Construction Cash Flow & Payment Report.

While most specialty contractors aim to take on jobs with higher profit margins, buying materials upfront can drain the available cash needed to make this happen.

Bidding on better jobs necessitates a business model that prioritizes growth and provides the ability to scale quickly. These tips can help specialty contractors get better jobs and grow their businesses.  

The solutions 

Understand the financials

It’s tempting to only budget for the substantial costs at the start of a project without planning how to handle the later stages. That’s not the most effective way to access more significant projects, especially as the industry faces high material costs and extended lead times. Breaking down project expenses is crucial before taking on one job or multiple projects. Learn more about construction financial management with this free course. 

Bid bigger

The lowest bids aren’t always the best ones. Before bidding on a potential project, research is vital. Under-bidding can lead to cash flow issues down the road, so be sure your prices align with the work and services you plan to provide. Learn more about the high cost of low bids in this helpful article. 

Strengthen vendor relationships

Vendor relationships are vital to getting the supplies you need for your projects. Unfortunately, we know that waiting for payment from past jobs can cause a trickle effect in the construction payment pipeline. A customer not paying on time directly impacts specialty contractors’ ability to pay their vendors on schedule, creating a cash flow domino effect. One way to improve vendor relationships is by discussing terms and offers upfront. Learn more tips about strengthening vendor relationships, which helps with long-term growth. 

Use Materials Financing

Covering upfront costs at the start of a project too often stunts business growth for specialty contractors. Slow payment has become acceptable in the industry, but this norm does not benefit business growth or bigger bids. Materials Financing is a cash flow tool that allows specialty contractors to get materials at the start of a project and pay for them up to 120 days later. Learn how this contractor grew his business during the global pandemic using Materials Financing. 

Specialty contractors work hard to keep their businesses on track, and these tips can help them gain insight or strengthen what they already have in place. Growing a business comes with great responsibility, but it also comes with access to great partnerships.

To learn more about how Levelset can help you get paid faster, be sure to connect with our team. 

As a major focus of the Biden administration’s Build Back Better plan, the federal government is allocating over a trillion dollars in funding for public infrastructure construction projects over the course of the next decade. A big amount of that construction funding is going to be headed directly to individual states, and there are plenty of opportunities for contractors to benefit from Georgia public projects.

With this much work available, contractors across the state would benefit highly from being ready to take advantage of these new opportunities — and being completely prepared to protect their payment rights while doing so.

Popular thinking in the construction world is often that public projects run into fewer payment problems than private ones do, but that often proves itself to be a misconception: Even when public works projects are a major source of benefit, contractors are at just as much risk of slow payment or nonpayment as on any private project. Protecting your payment rights on public works projects is absolutely crucial.

Payment protection on Georgia public projects

Even though payment challenges can be remarkably similar, payment protection is very different between private and public work. When payment problems come up on a public project, contractors can’t just file a mechanics lien as a solution, as both the federal government and state governments prohibit private companies from gaining interest in public property.

Instead, general contractors on public construction projects have to secure a payment bond for the project prior to the beginning of work. In the event of a payment dispute, contractors file claims against the payment bond instead of against the property itself.

The Miller Act provides directly for this payment protection at the federal level, and most states have their own version of it with laws usually called “Little Miller Acts.” Georgia has its own Little Miller Act which protects contractors on public works projects — as long as they stay on top of their payment rights in the process.

Working nearby? Check out How to Get Paid on Florida Public Projects.

Georgia bond claim laws

Georgia’s Little Miller Act covers all projects valued at $100,000 or more, although a bond may be required for contracts that are less than $100,000 at the public entity’s discretion.

This law includes expansive protection for unpaid contractors on public projects — parties who supply labor and/or materials to the general contractor, a subcontractor, a sub-subcontractor, or another supplier are protected under the state’s bond claim law. Even suppliers to suppliers are likely covered. 

Georgia Notice of Commencement

Georgia requires that a Notice of Commencement (NOC) is filed on all construction projects in the state. A Notice of Commencement is a form publicly filed in the county records to signify that a construction project has begun, including information that identifies the property, the work, the parties involved, and the scope of the project, and it can be filed by either the public entity or the project’s prime contractor.

However, it’s important to note that the Notice of Commencement has specific legal consequences for a lot of people working on a project. When a Georgia NOC is filed, subcontractors and suppliers must then deliver a Notice to Contractor when they start on the job. This gives property owners and general contractors notice that these parties are working the job, making it easier to track payments to them and collect waivers from them. If the Notice to Contractor isn’t properly sent, then the applicable party loses bond claim rights.

On the other hand, when a Georgia Notice of Commencement is not recorded, all subcontractors and suppliers to the job automatically have the right to make a claim against the bond, and are no longer required to deliver any preliminary notices.

Learn more: What Is a Notice of Commencement? (Forms & How To File)

Georgia preliminary notice

Georgia requires all parties who don’t have a direct contract with the general contractor to provide preliminary notice — also referred to as a Notice to Contractor. This notice preserves the right to make a bond claim in Georgia if the general contractor has properly filed and posted a Notice of Commencement. With that said, subcontractors hired directly by the project’s prime contractor don’t need to send any preliminary notice.

On public construction projects, preliminary notices must be received by the general contractor within 30 days of the filing of the notice of commencement, or within 30 days of the claimant’s first furnishing of labor and/or materials to the project (whichever is later). As mentioned prior, if a party fails to serve a required Notice to Contractor before the deadline, they lose the right to make a bond claim in the event of payment issues. However, if a Notice of Commencement was not properly filed on the project, then the sub-tier bond claim rights are not affected.

Georgia statutes don’t specify how the preliminary notice needs to be delivered to the general contractor, and a method of delivery with proof of receipt is usually best practice. Sending the notice by certified or registered mail is likely the best route.

Making a claim against a payment bond

Bond claims must be received within 90 days after the claimant’s last furnishing of labor and/or materials to the project. Delivery of notice of the bond claim is only specifically required when parties have no direct contract with the general contractor. Best practice in all situations, however, is likely for all parties to provide notice of the bond claim to start the process prior to initiating suit.

In Georgia, a bond claim only needs to include the amount of the claim and the name of the party to whom the labor and/or materials were furnished. That said, it’s usually also advisable to include the information of the general contractor (if the claimant was hired by a lower-tier party), and the contracting public entity, as well as including a description of the project and the labor and/or materials furnished.

The claim can be sent via registered or certified mail, or by personal service or other manners seen as acceptable for service of process. Additionally, Georgia bond claims only need to be delivered to the general contractor, but they can optionally be delivered to the surety if desired by the claimant.

If a suit to enforce the bond claim is filed, it needs to be initiated more than 90 days after the claimant’s last delivery of labor and/or materials to the project, but less than 1 year after the completion of the project as a whole.

Lien waivers

One of only 11 states to do so, Georgia statutorily mandates that all parties on a construction project use certain legislatively designed construction lien waiver forms.

If a contractor or owner asks you to use a lien waiver form that does not conform to the statutory form, the waiver will be invalid, and the contractor could get in legal trouble. As part of this, Georgia state law prohibits contractors and suppliers from waiving their right to file a mechanics lien in the contract.

Deep dive: Georgia’s Very Unusual Rules for Mechanics Lien Waivers

Georgia prompt payment laws

Prompt payment laws regulate the acceptable amount of time in which payments must be made to contractors and subcontractors on public works projects, which ensures that everyone on a project is paid in a timely fashion. Georgia’s prompt payment laws regulate payments from every tier of the construction payment chain.

In order to benefit from the state’s prompt payment act, the requesting party must first be considered as entitled to payment. All contractors and subcontractors need to perform in accordance with the provisions of the contract, satisfying any conditions precedent to payment — which in turn makes the enforceability of the prompt payment act completely dependent on the individual contract terms.

It’s also necessary for subcontractors to provide notice with payment requests, as the benefits of interest being accrued and potential attorney’s fees being covered are lost if this isn’t provided. A notice citing the statute and the interest rate provisions should be included at the time of submitting the pay request.

Public entities are required to pay their prime contractors within 15 days of receipt of a project invoice or pay application. With payments from the general contractor to their subs and suppliers, the prompt payment deadline begins upon receipt of the payment from the owner. When the project’s general contractor receives payment, they need to then pay their subs and suppliers within 10 days; this same time limits apply to payments from subs to their subs and suppliers as well.

Additionally, receipt is defined in the statute itself, which means that the time limit revolves around actual receipt of funds in the contractor or sub’s bank account — leaving less confusion around the particulars.

Retainage works just slightly differently, with the main difference impacting the prime contractor. Once the project has reached substantial completion, the public entity needs to pay out withheld retainage within 30 days after receiving an invoice for final payment. In turn, once received, contractors must release retention funds down the chain within 10 days.

Georgia’s Prompt Payment Act provides a list of certain circumstances in which owners and general contractors can withhold payments:

Any payments that are late or withheld improperly are subject to penalties. Interest accrues on the payment amount at a rate of 1% per month or a pro-rata fraction on the unpaid balance. However, this interest rate will not accrue unless the person being charged interest was notified of this at the time the payment request was made. Additionally, contractors may agree to other payment terms and lesser interest rates if they so choose, but, if a party materially breaches these contract terms, the interest rate will revert to the statutory 1%.

Georgia retainage laws

Retainage (or retention) is an amount of money withheld from payment to a project’s contractor or subcontractor until the end of a given project (or until a time specified in the contract). Generally, retainage is used to ensure that a contractor finishes its work completely and correctly.

Georgia’s retainage laws apply to almost every type of public construction project in Georgia, with the only exceptions being projects contracted by the Georgia Department of Transportation or any public works contracts whose value is less than $150,000, or projects where the duration is less than 45 days.

For all applicable public projects, the maximum amount of retainage that is allowed to be withheld from contractors is 10%. However, this could change when the entire contract value has reached the 50% completion mark; at this point, the public entity may decide to stop withholding retention from any future progress payments if it feels like the work done thus far is satisfactory.

On the other hand, if the public entity decides that the work being done is unsatisfactory or the contractor has fallen behind schedule, it can choose to continue withholding retainage after the 50%-completion mark (though this amount will be limited to 10% as before).

It’s important to note that recent changes have affected this, too. Effective for all contracts entered into on or after July 1, 2022, retainage on public projects is capped at no more than 5%, with no automatic reduction at the 50% completion mark.

This can have a trickle-down effect for all of the contractors on a project, depending on the situation: If the public entity is withholding retention, the prime contractor can then withhold retainage from their subs and suppliers. In these situations, the rate withheld cannot be any more than what the entity is withholding from the prime contractor.

If there are still outstanding retainage payments when the project is nearing closeout, then once the prime contractor submits their invoice for final payment upon substantial completion, the public entity then has to pay the rest of the retainage within 30 days of receipt.

Recent changes to the state’s retainage laws have effects here as well. For all contracts entered into on or after July 1, 2022, subcontractor retainage may be released separately upon completion of their portion of the work at the discretion of the public entity and following approval from the general contractor.

Georgia’s retainage laws for both public and private projects don’t provide any specific penalties for nonpayment of retainage, but the state’s prompt payment laws instead treat retention payments like any other payment on a public works project that is held back.

Protect your payment rights on every public project

Though there are a number of guidelines that need to be followed in order to secure payment rights on public projects in Georgia, going the extra mile to protect your payment rights can help to ensure that you’ll receive the right payment for your work in any situation.

Even though preliminary notices are required for many contractors on public projects in Georgia, it’s important to file them as early as possible in order to ensure that bond rights are maintained. Even beyond maintaining these rights, sending a preliminary notice maintains a line of communication throughout the chain on a construction project, giving all contractors involved the opportunity to make sure that payment disputes are taken care of earlier on in the process rather than later. 

When a company is dealing with documentation like what is needed for preliminary notices and bond claims, proper document retention and management is an absolute necessity when it comes to protecting your payment rights. Especially when sending notices and maintaining the proper documents needed for claims, it can be enormously beneficial for you to have an organized policy for document retention.

If you’re looking to grow an HVAC business, there’s great news: The demand for heating, ventilation, and air conditioning is growing quickly. Fortune Business Insights notes that the HVAC sector is expected to grow by $20 billion this decade. Also, the Air Conditioning Contractors of America estimate 13% job growth by 2030, outpacing the average across all industries.

What does that mean for you as a business owner? Growth opportunities exist now and on the horizon, and it’s up to you to structure your business to capture them. Taking the time to evaluate and position your business now can help set you up for success for years to come.

So read on to learn about strategies for cash flow, sales, finance, marketing, operations, staff, and leadership. Every business has room for improvement, so if you’re looking to make positive changes, look no further than our guide. 

1. Manage your cash flow as well as you handle air flow

An HVAC company that’s not managing cash flow is probably doing about as well as an AC unit that isn’t cooling. Whether you’ve just gotten into business or you’re a seasoned veteran, you know that payments can lag behind job completion—sometimes way behind. But your costs keep adding up, and you need cash on hand to continue expanding your workforce, buying materials, and taking on new jobs. 

Managing all of this well means becoming a master of your cash flow. 

Becoming a successful business owner means knowing when to delegate and when to stay involved. When it comes to cash flow, it’s important to always have your finger on the pulse. 

Create a cash flow dashboard and check on it regularly

Work with your accounting team to create a real-time view of your cash flow that you can check any time. Modern accounting software can take into account expenses, accounts payable, and accounts receivable to help you spot cash flow problems before they sink your business. You can also create a cash flow dashboard on your own—just follow the steps in our cash flow calculation webinar.

At minimum, you need to evaluate your business’ cash flow situation every week—and some situations call for daily checks. 

Use cash flow to inform your business decisions

When making large financial decisions for your business, operate with certainty rather than assumptions. Cash flow predictions and analytics are useful, but you’ll also want to lean on cash flow statements from past months and years that give a true picture of how your business is doing. 

Beyond staying on top of cash flow as an owner, you’ll also want to make sure that you’ve developed operational excellence among your team: prompt invoicing, strong payment terms, and efforts to drive down costs where possible. 

Action item: Evaluate a recent cash flow statement and develop a real-time cash flow dashboard. Make it a priority to check in on your business’ cash flow at least weekly.

Why it matters: If your business is cash flow negative, it doesn’t matter if you have significant revenue coming in down the line. Growing and maintaining your HVAC business means having positive cash flow to expand your workforce and take on new jobs. 

Read more: Do Repair and Maintenance Companies Have Mechanics Lien Rights?

2. Set your pricing as precisely as the thermostat

Too many HVAC businesses fail to price their services correctly, either aiming too high to attract customers or too low to maintain profitability. For many business owners, nailing down the right pricing structure feels like a mystery, and some resort to simply copying competitors in hopes of success. But here’s the truth: HVAC businesses charge wildly different rates (anywhere from $70 to $200 or more per hour), and you need to figure out the price that will work for your business.

Your prices are going to depend on your region, whether you’re doing commercial or residential HVAC, and your specialization. 

Fortunately, getting the price right isn’t difficult, and you only have to follow one simple rule: The customer has to cover every cost. 

When you’re just doing individual jobs, it’s easy to forget about the cost of doing business—but when you’re running a business, you need to remember that every job you take on needs to cover overhead as well. In addition to materials and labor for an HVAC installation or repair job, you need to cover the cost of support staff, offices, benefits, and more. 

Oh, and you do want to make a profit, right? Your pricing needs to take all of this into account. 

Take stock of your current costs and future needs

Tally up everything that you need to operate your business, from materials and staff to training and software. 

And remember: The cost of doing business is always increasing, so make adjustments for investments in new technology, higher material prices, increased wages, and more. You may also be thinking about expanding your business, which could require significant capital. 

Determine your profit margin to set prices properly

In order to make money, you need to take in revenue that exceeds your operating costs—so decide what percentage you plan to take in above and beyond your expenses. 

Let’s say that your business cost $800,000 to run last year, and you project that increases this year will put your costs at $1,000,000. If you want a 10 percent profit margin, you’ll need at least $1,100,000 in revenue. Look at your past year to estimate how many billable hours you expect to accrue over the course of the year. For example, if you’re likely to have 5,000 billable hours from your technicians, you’ll need to charge an hourly rate of $220 to reach your desired profitability. 

Financial projections are never perfect, but working with hard numbers is much better than pricing by taking a shot in the dark. Make sure you’re billing for sustainable growth, and follow through with excellent service. 

Action item: Take a look at your current hourly rate and billable hours, then determine whether they are actually covering your costs and working toward making a profit.

Why it matters: Too many businesses fail because they underprice or overprice their services. Make sure you know the real cost of running your HVAC business and price accordingly. 

3. Get more jobs by training a well-oiled sales machine

The core of a successful HVAC business is a strong sales process. You can have the best technicians, accountants, and customer service reps on the planet, but if you don’t get jobs, your business will not grow. Everyone has had an experience with a bad salesman that has turned them off a company, so you need to make sure to avoid the pitfalls that keep sales from closing. 

Here’s what your sales staff should and should not do to close sales

Four techniques for closing sales

Here are four ways that strong HVAC businesses get the sale for both repair work and new installations.

Remember: Especially in residential settings, the customer is dealing with a potentially large outlay of funds and may be in a stressful situation—like a burst pipe or a broken heater. You want your sales staff to act with empathy and understanding. 

What not to do when trying to close sales

Here are big mistakes you can make when try to close sales in the HVAC business.

Take what you’ve learned from sales in the field and transfer that knowledge to your sales manager, who needs to empower your sales staff to treat customers right and close sales. For many residential customers, a call to an HVAC company can be frightening as they consider the high cost of heating or cooling their homes. Both residential and commercial HVAC companies also need to be able to demonstrate their value to potential customers by addressing needs, transparently discussing pricing, and maintaining professionalism. 

Action item: Evaluate your sales performance and audit your processes to see if there are areas for improvement.

Why it matters: Without a strong sales team, there are no jobs to bring in revenue for your business. Making sure that your sales staff is well trained is a crucial part of running a successful HVAC business. 

4. Market your business where your customers already are

Growing an HVAC business requires that customers know who you are and how to find you. Having a recognizable brand, strong online presence, and an easy-to-use website are vital for growth. 

According to Findstack, 72% of people use Google reviews to find businesses, and businesses with at least 200 reviews generate, on average, twice as much revenue. As an HVAC business owner, you need to recognize that the majority of your marketing efforts must go toward optimizing for Google searches, which is where the majority of your potential customers are likely to find you when they’re looking for repairs or installations for furnaces, AC units, heat pumps, and more. 

Determine your marketing spend

In general, your marketing spend should be a percentage of sales rather than a fixed number, because you need your marketing budget to increase as your sales increase. Many HVAC businesses spend anywhere from 5 to 20 percent of their sales on marketing. 

Focus on search engine optimization (SEO)

Either hire an outside agency or an internal specialist who can help you rank in Google for relevant search terms, like “HVAC company in X city.” You’ll want a strong domain name (www.yourdomain.com), well-written marketing copy, and perhaps even a regularly updated blog with information that supports potential customers. 

You can have your business to show up in Google Reviews and on Google Maps by signing up for a business profile. 

Build an excellent and easy to use website

Your website needs to work well on both computers and mobile devices, have your contact information readily available, and include a contact form that is easily accessible. When your potential customers find your website from a Google search, make it easy for them to get information about your business and reach out to you.

Create a recognizable brand

Beyond optimizing your website and working toward better rankings in Google, you’ll want to make sure that you have a strong brand. Considering your business’ colors, logo, slogan, name, uniforms, trucks, and more can make marketing easier—and make it easier for your business to spread by word of mouth.  

If people know about your business, you’ll get more business. Once you’re an established name in your area, marketing becomes easier, but it never loses importance. Staying ahead of the competition means continually reaching out to potential customers and positioning your HVAC business as the best solution to their needs.

Action item: Take a close look at your current branding and your online marketing efforts to find areas for improvement.

Why it matters: The majority of your customers are looking for you online, so making sure you stand out there is critical for business success.

5. Optimize your operations to keep things moving smoothly

Strategic thinking is valuable, but a lot of business takes place in the weeds—in the tasks that your employees undertake over and over again. As your business grows, you’ll have less direct involvement in the day-to-day operations of the company. Too many business owners try to fight fires or manage every aspect of operations, but this is a recipe for burnout and stagnation.

Instead, you need to optimize your operations by building great processes, writing them down, and trusting your employees. What does that look like in practice?

Build great processes

Take all that you’ve learned about HVAC, sales, and more—and add in knowledge from your employees. Use all of this accumulated experience to standardize how your team handles calls, talks with customers, and manages repairs and installations. 

You need to have clear, written instructions for every company process. This has three purposes: it keeps everyone on the same page, it saves supervisors from having to repeat information, and it ensures that wisdom isn’t lost when you have employee turnover. 

Trust your employees

Once you have standard procedures, let your employees follow them. Too many business owners try to micromanage, but this approach is rarely successful. Instead, refine your procedures over time and use ongoing training to empower your employees to handle every situation. 

In the end, your business is a collection of many different processes—from complicated HVAC installations to simple phone greetings. Having coherent, unified processes for every aspect of your business improves productivity and prevents knowledge from disappearing when employees leave your company. 

Action item: Identify processes that need standardization, write out clear instructions for those processes, and keep going until you have documentation to handle (nearly) every aspect of your business.

Why it matters: As you grow, you’ll have less direct control over your business. By crafting great processes, your wisdom stays in every aspect of the company even as your attention moves toward strategy rather than day-to-day operations. 

6. Create an amazing team of technicians and support staff

Your employees are the face of your HVAC business, which means that whoever you hire will represent your company in front of your customers. Successful business owners put their people first because a thriving team leads to a growing company. Forbes reports that highly engaged employees are up to 21% more profitable, while disengaged employees cost the economy more than half a trillion dollars annually. 

How can you keep employees engaged? 

You’ll need to improve at every stage: hiring, training, benefits, and development. If you take steps in all three of these areas, you’ll grow a better team that will be more engaged. 

Hire great employees

Look at your job postings through the lens of a potential employee: What will you offer them? Too often, business owners focus on what they need instead of what they’re offering. Keep the interview process short and focused, but make sure potential employees demonstrate competency—regardless of whether you’re hiring a technician, a salesperson, an accountant, or anyone else.  

Focus on training and onboarding

Create onboarding procedures for every position. It’s especially important to standardize HVAC technician training and identify areas where new hires need improvement. Make sure your onboarding period orients new employees to skills as well as company culture. 

Make it clear how employees can grow from the start. Rather than providing a job, open up a career path for everyone who works in your HVAC business. Strong employees are attracted to growth opportunities, so provide incentives and promotions for performance to everyone who works for you.

Offer as many benefits as you can

The more you can offer potential employees, the better employees you will attract. Strong health benefits, retirement plans, and leave policies may seem like high costs, but the value of productive employees can quickly outweigh the initial investment.

As the business owner, you may be doing more work than ever before—but you’re also interacting with your customers much less than your employees do. Hiring, training, and developing an excellent team is the best investment you can make in growing your business. 

When your employees consistently treat your customers with respect and demonstrate professional knowledge, growth comes naturally. Also, when you invest in your employees, they’re more likely to stick around, helping you to keep turnover low and engagement high. 

Action item: Look at your processes for hiring, training, and development to identify areas for improvement. 

Why it matters: Your employees are your business’ single greatest asset. Treat them accordingly. 

7. Grow as a leader by building on your existing knowledge

Becoming a strong leader for your business is the most important step you can take if you want to grow. Business leaders with a clear vision, strong communication, and deft organization are able to overcome challenges and make wise decisions as they grow. A study in the Economist shows that more than half of organizations fail to move from strategy to execution—all because of a lack of leadership. Don’t let your HVAC business suffer because you aren’t growing as a leader.

But how do you grow as a leader?

Many HVAC business owners started out as technicians and supervisors—and that may be true for you, too. The upside of that path is that you have excellent background knowledge about the industry that can inform decisions about materials, techniques, or sales. On the other hand, very few people are natural born leaders, and working as a technician doesn’t always offer the opportunity to develop leadership skills. 

So start working on becoming a better leader right now. 

Always keep communicating

As the business owner, it’s easy to get stuck in your silo—but it’s a mistake. Your technicians, salespeople, customer service representatives, accountants, and more are at the front of your business and have information you need. Take time to ask three simple questions: What’s going well? What isn’t? How can I help you?

Stay open to feedback

It’s easy to get caught in a rut doing business the way you’ve always done it. Be open to new insights by meeting with other business owners, attending classes, joining professional groups, and getting feedback from members of your team. 

Never stop learning

Leadership skills develop over time and by incorporating insights from many sources. Listen to leadership podcasts, read leadership books, and take leadership classes with the intent to never stop growing as a leader.

The success of your business starts with your own success as a leader. Build from your strongs and work on your weaknesses to develop into a business owner capable of growing and expanding where you want to be. 

Action item: Make a plan to become a better business leader this year.  

Why it matters: Your business’ success starts with you. Leadership skills take time to develop, and these skills will help you gain the insights you need for continuous growth. 

Make this the year your business thrives

Whether your HVAC business is relatively new or you’ve been at it for years, there are always ways to make things better. 

Starting from the top, develop yourself into a more capable business leader with the vision to navigate the uncertain economy. Make sure that you surround yourself with an excellent team as well as streamlined processes. Stay on top of your business’ financials and cash flow statements to grow sustainably. Train a competent sales staff, and market your company based on all of the strengths you’ve created. 

In the State of New York, contractors working on certain residential projects need to have a good understanding of the NY Home Improvement Contracts Act. Under these statutes, on certain protected projects, there are a fair amount of rules and requirements that must be met, particularly when it comes to what must be included in the contract between the contractor and the owner. Here’s what NY residential contractors must include (and what can’t be included) in a New York home improvement contract.

What types of projects are covered under the NY Home Improvement Contracts Act?

Let’s start with some basic definitions under NY Gen. Bus. Law §770.

What’s considered a “home improvement contract” in New York for the purposes of these rules? First and foremost, it covers all contracts that are valued at $500 or more. As far as the services being performed, home improvements include the following:

Repairing, remodeling, altering, converting, or modernizing of, or adding to, residential property and shall include, but not be limited to, the construction, erection, replacement, or improvement of driveways, swimming pools, siding, insulation, roofing, windows, terraces, patios, landscaping, fences, porches, garages, solar energy systems, flooring, basements, and other improvements of the residential property and all structures or land adjacent to it.

This definition also covers a few other types of contracts. One such additional contract includes the construction of “custom homes” — in other words, a new, single-family residence to be constructed on premises owned by the purchaser at the time of contract that the owner intends to occupy.

Another inclusion is the installation of any “home improvement goods or services.” Think alarm systems, A/C systems, fencing, or any other goods which become permanently affixed to the property.

Furthermore, the statutes list specific types of contracts that do NOT fall under these requirements:

What needs to be included in a NY home improvement contract?

Now onto the meat of these statutes: What must be included in a NY home improvement contract? These requirements can be found under NY Gen. Bus. Law §771. The first step is that the contract must be in writing and signed by both the contractor and the property owner.

The contract must also include all of the following information:

“Any contractor, subcontractor, or materialman who provides home improvement goods or services pursuant to your home improvement contract and who is not paid may have a legal claim against your property known as a mechanic’s lien. Any mechanics lien filed against your property may be discharged. Payment of the agreed-upon price under the home improvement contract prior to filing a mechanic’s lien may invalidate such lien. The owner may contact an attorney to determine his rights to discharge a mechanics lien.“

Additional requirements for home improvement roofing contracts

In addition to all of the required information listed above, roofing contractors on such covered projects have a few extra requirements

The first of these additional requirements pertains to disclosures of insurance coverage.

If the roofing contractor has employees, then they must carry worker’s compensation insurance covering all employees. If there are no employees, then they must provide a certificate of attestation of exemption (CE-200) from the NY Worker’s Compensation Board.

Also, roofing contractor’s must also provide proof of general liability & property damage insurance coverage of at least:

One last thing to note: Roofing contracts on these types of projects cannot require a deposit or other payments prior to commencement of the work — with one exception. The roofer may invoice the owner for materials upon delivery of said materials to the owner’s property.

Penalties for non-compliance

Failure to include any of these provisions, or other violations under the Home Improvement Contracts Act can lead to varying degrees of penalties.

“Technical violations,” are subject to civil penalties of no more than $100 per violation. These encompass minor violations. However, substantial violations come with steeper penalties of up to $250 per violation or 5% of the aggregate contract price; which cannot exceed a total of $2,500 in penalties per contract. These penalties may be increased at the discretion of the court, depending on the following factors:

Speaking of willful violations, if the violation is found in bad faith and constitutes fraud under NY Gen. Bus. Law §772 an owner may sue and recover the actual damages incurred, plus $500, and any reasonable attorney fees associated with the litigation.

As a contractor, you may have realized that taking care of every detail will not be enough as there are always going to be risks associated with your work. Whether it’s the risk of an unexpected accident or a project running over schedule and costing you money, there are many things that can go wrong. […]

The post Business Interruption Insurance in Construction: What Contractors

As a contractor, you may have realized that taking care of every detail will not be enough as there are always going to be risks associated with your work. Whether it’s the risk of an unexpected accident or a project running over schedule and costing you money, there are many things that can go wrong. […]

The post Business Interruption Insurance in Construction: What Contractors Need to Know appeared first on Levelset.

In the construction industry, starting a new project means encountering automatic, upfront costs. How individual specialty contractors handle these costs vary, but as the saying goes, “Cash is king.” From buying materials to hiring crews, business begins when cash flows.  Getting paid in a timely manner is another challenge for specialty contractors since the average […]

The post 5

In the construction industry, starting a new project means encountering automatic, upfront costs. How individual specialty contractors handle these costs vary, but as the saying goes, “Cash is king.” From buying materials to hiring crews, business begins when cash flows.  Getting paid in a timely manner is another challenge for specialty contractors since the average […]

The post 5 Ways to Improve Cash Flow in Your Construction Business appeared first on Levelset.

Following the lead of numerous states across the country, Texas is upping its commitment to major public infrastructure projects: A May 2022 release from the City of Austin laid out plans for $400 million in construction at the Austin-Bergstrom International Airport, while another announcement that month by the Texas Water Development Board laid out over […]

The post How to Get Paid on Texas

Following the lead of numerous states across the country, Texas is upping its commitment to major public infrastructure projects: A May 2022 release from the City of Austin laid out plans for $400 million in construction at the Austin-Bergstrom International Airport, while another announcement that month by the Texas Water Development Board laid out over […]

The post How to Get Paid on Texas Public Projects appeared first on Levelset.