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Insurance for Electricians: What It Covers & Why You May Need It

At any given time, an electrician could be performing work on a construction project that involves high stakes. For example, a faulty connection somewhere along a circuit could trigger a fire that causes significant damage or total loss to the structure. This type of damage may leave electrical contractors unable to foot the bill.

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1 year ago

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How a Construction-to-Permanent Loan Impacts Contractors & Lenders

A construction-to-permanent loan can help owners save time and money — one loan and closing transaction streamlines. When a property owner wants to finance the construction of a new building, they typically have to obtain two loans: one loan for the mortgage on the completed home, and another for the land purchase and construction expenditures.

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17 Alternatives to Common Building Materials

If necessity is the mother of invention, consider scarcity and inflation the grandparents of throwing your hands in the air and saying "Well, what can I order?" In recent years, material shortages and volatile material prices have slowed so many projects to a grinding halt. As a result, contractors and property owners are increasingly considering [] The post 17 Alternatives to Common Building Materials appeared first on Levelset.

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A Plumbing Contractor’s Guide to Insurance Coverage

Plumbing contractors should include business insurance as an integral part of their financial strategy. When you tackle the jobs you’ve secured, it’s also important to plan for the unexpected. With numerous policies available, the plumbing contractor’s insurance landscape offers many ways for you to protect your physical and financial business assets. Obtaining an insurance policy […]

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A Plumbing Contractor’s Guide to Insurance Coverage

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What Is a Certificate of Insurance (COI) for Contractors — and When Do You Need One?

Contractor's insurance should be a crucial part of your financial strategy. Insurance also puts other parties’ minds at ease when they want to hire you as a specialty contractor. Before you can get hired and begin work, you’ll need to prove to owners and/or general contractors that you are a special contractor.

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1 year ago

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How to Increase Cash Flow for Your Construction Business When You Can’t Get the Financing You Need From the Bank

As a commercial specialty contractor, it can be frustrating to have the crew, time, and skills you need to take on construction projects but not enough cash to purchase materials. Many contractors feel using their personal accounts is the only way to get the cash they need to help their business and start bidding on jobs. In this article, we’ll share five ways you can increase your cash flow.

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1 year ago

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Carpenter’s Insurance: Who Needs It & Why

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Insurance is one part of a strategy to keep your carpentry business financially healthy. You can practice safety and use common sense on the job, but there’s no way to predict when accidents or injuries might occur. To minimize any financial damage, a comprehensive carpenter’s insurance plan is a smart bet.

What is carpenter insurance?

Carpenter’s insurance is a financial instrument that helps protect your business if accidents, injuries, or illnesses occur in a work-related capacity. For protection from financial consequences that could be small or large, you pay a premium to an insurance company for policies that cover many unexpected situations.

There are many policies that apply to a carpenter, but a simple business owner’s policy can include property damage and liability coverage. If you break a window in a customer’s home, property damage coverage helps pay the cost of repair. If a third party gets injured on a job, liability coverage helps pay the cost of legal defense if you get sued for the accident.

Does a carpenter need insurance?

Carpentry is a diverse occupation. During daily operations, any number of accidents could happen on a project. A large claim against your business could have a devastating financial effect that could threaten your livelihood. Having carpenter’s insurance is an affordable way to protect against these potential issues.

To illustrate the need for insurance, you (or an employee) could be nailing a stud in place on the second floor of a new home. The board slips from your grip and strikes the employee of another sub walking below. Injuries are minor but the person needs medical treatment, and your carpenter’s liability insurance will help cover the costs of those medical services.

Insurance serves another purpose. Without an adequate subcontractor insurance plan, you may not be able to land work with a general contractor (GC) or owner. The parties who hire you will want to know that you, and they, are protected in case something goes awry on the job.

What insurance does a carpentry contractor need?

A carpenter’s business owner policy is a good foundation, but you’ll want to explore other policy options that may apply to your business. Here’s a partial list:

Commercial auto insurance: You may operate trucks or vans, and commercial auto coverage enters the mix if you get in an accident with another vehicle or damage a fence on a job.

Inland marine insurance: This coverage protects tools, equipment, or building materials while they are stored on the job, at your business location, or anywhere in transit.

General liability insurance: General liability insurance protects contractors in situations where someone claims the contractor’s work led to bodily injury or property damage. An owner or GC may want you to have this in case you cause an accident or injury on a project. And while it’s not a legal requirement in most cases, in some states it may be required to get licensed.

Professional liability insurance: You may need this coverage if you perform design or consulting services that involve the sale of drawings or blueprints.

Surety bonds: Surety bonds pay out to an owner or GC if you are not able to perform your work per the terms of a construction contract.

Workers’ compensation insurance: If you have employees, a workers’ compensation policy helps them replace lost income and pay for medical treatment if they are injured or fall ill due to job-related conditions.

Cyber liability insurance: This helps cover the cost of recovery or restoration of electronic records if computers or mobile devices are hacked or destroyed.

How do I get carpenter’s insurance?

In most cases, the insurance application process requires basic information about your business. You should be prepared to provide information that includes payroll data, annual revenue figures, and a history of prior insurance claims, if any.

To obtain carpenter’s insurance, you’ll need to contact an agent or broker. You can begin the application process in person at the agent’s office or online applications are also another possibility.

After you give the agent or broker all the necessary information, the application is reviewed by an underwriter. If approved for the policy, you’ll need to remit a down payment to bind the contract, and then you’ll be covered as of the effective date.

How much does carpenter’s insurance cost?

The cost of carpenter’s insurance varies based on many factors. Some of these factors include:

The amount of coverage: To meet the terms of a contract, GCs or owners usually want to see a general liability amount of $2 million. If you choose more coverage, the cost of the general liability coverage will increase. This rule also applies to coverage for business property and vehicles.

Annual revenue: The more work you do, the more money you can expect to pay for carpenter’s insurance. If you have a large operation that takes in $2 million annually, premiums will be higher for you than a company whose revenue is $500,000.

Your geographic location: If you perform work in an area that experiences weather events like hurricanes or flooding, the strong probability that you’ll incur a claim is factored into your premium. Insurance companies look at historical statistics to determine how likely your business is to incur a claim.

Insurance expenses for carpenters will also depend on the type of work you do. Carpenters should clearly define their scope of operations. If you have a shop where you’re making custom woodwork, that pursuit classifies differently from a framer — or a carpenter who does both.

A carpenter can perform a lot of different functions so they need to include all duties in their work description. This helps the insurance carrier to rate the policy properly and ensure coverage applies if a claim does occur.

What other insurance policies can be bundled with subcontractor insurance?

The most commonly “bundled” carpenter’s policy is the business owner’s plan. It includes general liability insurance and business property damage coverages. Often, you can amend this core package to include higher coverage amounts for high-value equipment or endorsements like basic cyber insurance. Commercial auto and workers comp policies must stand on their own, however.

Purchasing carpenter’s insurance does not have to be a complicated endeavor, and the protection you gain will give you and other parties some measure of security. Getting work will also be easier when you can provide valid proof of insurance to an owner or GC.

Nail down your insurance coverage

Carpenter’s insurance can help create a solid financial foundation for your business. If accidents or injuries occur on the job, these policies protect you from associated costs that could cut deeply into your bottom line. There are various policies that address different parts of your operation, and it’s easy to start and maintain a comprehensive insurance plan through any agent or broker.

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40 Best Construction Podcasts in 2022

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Does GC Insurance Cover Subcontractors?

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Accidents happen, especially in construction. Between miscommunication, the wrong specifications, carelessness, or events out of anyone’s control, things can go wrong, and the damages can be expensive. General contractors know these risks when they take the role. Luckily, that’s what insurance is for, right?

But what if the general contractor isn’t at fault, and a subcontractor is to blame? Does a general contractor’s insurance cover their subcontractors’ accidents or mistakes? While there isn’t a cut-and-dry answer to these questions, we’ll take a deeper look into insurance coverage and what happens in these situations.

Who is covered by an insurance policy?

At their core, insurance policies are agreements between two parties: the insurer and the policyholder.

The policyholder is the primary beneficiary of the policy. What this means is that financial losses caused by accidents, mistakes, and other issues that are the fault of the general contractor will be covered under the policy. This is the case when the losses impact only the contractor or sub holding the policy, or when a mistake affects a third party.

If a sub accidentally drops a steel beam on the project manager’s new sports car, that subcontractor’s liability insurance policy would likely cover the damage. The car owner can’t go after a different contractor’s insurer for the damage.

GC insurance & subcontractor coverage

Most general contractors and subcontractors are required to carry an insurance policy in order to to obtain a contractor license. However, the types of policies and their limits (the maximum amount claims can pay out) are limited.

However, with the amount of risk involved in a standard construction project, general contractors typically need to hold multiple policies. General liability, builder’s risk, and subcontractor default insurance are among the most common, and wrap insurance is growing in popularity.

Let’s take a look at each of these policy types — and whether or not a GC’s insurance will cover their subcontractors.

General liability insurance

Verdict: A contractor’s general liability insurance typically does not cover subcontractor damage.

A general liability insurance policy protects the policyholder from claims of property damage or bodily injury caused by the contractor or its employees. This policy may also cover legal fees involved in certain types of lawsuits. The contractor (policyholder), the property owner, or a third party unrelated to the problem may file a claim against the policy.

For example, if a plumbing contractor accidentally damages the foundation of the building they’re working on, their general liability insurance policy will likely cover it. Or, if that same contractor damaged the neighboring structure while in the course of their work, they could submit a claim through their general liability policy.

General liability is the most common type of insurance carried by construction companies. It affords the contractor some stability against financial stress, helping them continue to provide quality service. It also gives the property owner a safety net against mistakes or accidents caused by the contractor.

A general contractor may add a subcontractor as an additional insured entity under their policy, but this isn’t very common.

Builder’s risk insurance

Verdict: Builder’s risk insurance may cover subcontractor damage in some situations.

When a contractor or project owner wants to protect the structure against risk, they can purchase a builder’s risk insurance policy. Builder’s risk insurance protects the building while it’s under construction or renovation, allowing the policyholder to recoup losses caused by accidents, fires, weather, vandalism, theft, or other risks named in the policy. Clearly, the work of the subcontractor will be covered, though damaged or stolen equipment may be on a case-by-case basis.

There are certain damages that a builder’s risk insurance policy won’t cover. Events like damage to tools and equipment, faulty building design, or defective materials typically aren’t covered in a builder’s risk policy. For this reason, it’s an add-on policy that many contractors carry in addition to their general liability insurance.

Subcontractor default insurance

Verdict: SDI covers the policyholders against subcontractor failures.

Subcontractors don’t always do what they’re supposed to do, and the financial implications can be significant. Contractors can protect themselves from these risks by purchasing subcontractor default insurance.

Subcontractor default insurance protects policyholders against the financial losses caused by a default of performance of a subcontractor. For example, if a sub-sub fails to complete their obligation and causes schedule overruns, necessitates hiring a new sub, or causes another ripple effect, the policy will cover the costs associated with the failure. These policies can serve as alternatives to performance bonds, or as a supplement to a surety bond.

Wrap policies (OCIP/CCIP)

Verdict: Wrap policies typically provide general liability insurance to everyone on the project, including subcontractors.

In situations where the project owner or general contractor prefers not to worry about the potential of uninsured subs, they may purchase a wrap policy, known as a controlled insurance program (CIP).

A CIP provides everyone on the project with general liability insurance, allowing some subcontractors to forgo carrying their own policy. In some cases, a wrap policy may even include worker’s compensation coverage.

There are two forms of wrap policy: OCIP and CCIP. An OCIP stands for Owner Controlled Insurance Policy, while CCIP stands for Contractor Controlled Insurance Policy. They are essentially the same policies and offer the same coverage — the main difference being who purchases the policy.

There are several reasons contractors and owners purchase a wrap policy for a project. First, it helps ensure that any accidents or mistakes are handled smoothly. Since one insurer provides coverage, multiple companies won’t be fighting over responsibility for payment. Also, a wrap policy may allow a project owner or general contractor to avoid penalties for hiring uninsured subcontractors.

Bonds and subcontractor coverage

While insurance protects the policyholder from loss due to accidents and mistakes, a bond is quite different. A construction bond is a three-party agreement between the principal (i.e. the contractor), the surety, and the obligee (i.e. the person hiring the contractor).

The bond is purchased by the contractor and protects the property owner from financial risk. A GC’s performance bond protects the owner from non-performance of the prime contract. A payment bond protects the owner’s property from mechanics lien claims in case a subcontractor or other party doesn’t receive payment.

A contractor’s bond typically does not cover the actions of subcontractors unless they are specifically named on the bond. In practice, if a subcontractor defaults on a critical path task, it could cause the GC to default on their prime contract and lead to a claim on the bond.

How to ensure subcontractors are covered

The effects of accidental damages and injuries can sidetrack a project or result in financial doom. For those reasons, general contractors and project owners need to ensure they are protected against subcontractor mistakes or damage.

Luckily, ensuring subs have coverage isn’t necessarily challenging. Project owners can require the general contractor to purchase a subcontractor default insurance policy, while also providing proof of their own coverage. Or, general contractors can require subcontractors to provide proof of their insurance policy, and the general contractor can keep track of subcontractor policies along with other compliance documents.

If an owner or GC wants to use a bond to protect against subcontractor default, they can name them on the GC’s bond, or require them to purchase a subcontractor performance bond.

However, one of the most surefire ways to ensure that everyone on the project has insurance coverage is to purchase an OCIP or CCIP wrap policy. These policies cover everyone on the project, allowing for a collaborative approach to insurance for better protection.

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Top 8 Construction Health and Safety Hazards — and Ways to Protect Your Jobsite

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In the construction industry, a lot can go wrong with the progress and completion of the structure itself. By the same token, many potential situations pose risk to the health and safety of your employees and others working on the jobsite. Hazardous conditions can have both short-term and long-term financial consequences along with the possibility of work-related illness or injury.

The Occupational Safety and Health Administration (OSHA) and the American Industrial Hygiene Association (AIHA) have both developed “Focus Four” lists that highlight job hazards that can have long-term negative effects on the health of your employees and your construction business.

Here’s an overview of eight of the top safety and health hazards in construction — and preventive measures and resources contractors can use to mitigate these risks.

1. Falls

It’s no secret how dangerous — and unfortunately prevalent — falls are. According to data from the Bureau of Labor Statistics, falls accounted for more than 1 in 3 jobsite fatalities in 2019.

Falls trigger a lot of OSHA safety inspections, and they account for half of the top 10 violations in construction. Many of the accidents stem from oversights that could have been prevented with more vigilance on the job. You must be wary of these hazards and make prevention a part of your formal safety program.

OSHA requires that holes in walking surfaces and skylight areas six feet or higher above a lower level must be protected by covers, guardrails, or fall arrest systems. Guardrail installation also applies to stairs, runways, and ramps situated six feet above a lower level. Establishing and enforcing these guidelines as part of your daily operations can significantly reduce the number of falls on the job.

2. Getting caught in or between

Getting caught in a piece of machinery or caught between a piece of heavy equipment and the ground or a wall could result in the loss of life or limb. Clothing or jewelry can get tangled up in an unprotected pulley or conveyor system, while unguarded trenches pose risk for collapse and crushing injuries or suffocation.

To reduce the risk of injury or death, contractors must train employees to be aware of heavy equipment during operation and refrain from wearing loose clothing or apparatuses attached to the body that can get caught up in moving machinery parts. Workers should also stay clear of the radius of operation for devices such as fans, drive belts, or come-alongs, for example.

3. Struck-by accidents

Head, neck, or bodily injuries and death most often occur when workers use power tools, walk beneath elevated work areas, and situate themselves near improperly stored building materials. “Struck-by” fatalities numbered 170 in 2019, accounting for 15.4% of all deaths in the construction industry. According to OSHA, “approximately 75% of struck-by fatalities involve heavy equipment such as trucks or cranes.”

Prevention and risk avoidance remain top priorities for your contracting business. Among the top safety measures implemented in your daily operations, you should ensure that all loads being moved are secured, caution employees to steer clear of suspended loads and overhead work, and strictly enforce the use of personal protective equipment (PPE), such as hard helmets and safety glasses.

4. Electrocution

Powered-up equipment and electrical lines stand out as two principal risks on a jobsite. Inadvertent contact with exposed or hot wires or improper operation of energized machinery hold obvious peril for employees who have not undergone necessary safety training.

According to CPWR, The Center for Construction Education and Training, electrical contractors account for about 32% of electrocution fatalities. The risk is highest for power line installers, who have the highest rate of electrocution death of any occupation.

Part of your formal safety program aimed at reducing burns or electrocution must require that workers wear clothing and PPE that includes boots, gloves, long-sleeved garments, and face shields. Keeping a safe distance from power lines and marking areas where powered equipment is in use will also help minimize the risk for electrical accidents. You should also ensure that electrical equipment is adequately powered down and completely shut off.

5. Manual material handling

AIHA cautions construction companies that moving building materials and equipment manually can lead to health complications. Pushing, pulling, holding, and carrying construction items often places employees in awkward and unnatural positions that can cause musculoskeletal disorders (MSD).

These injuries often result in missed time or permanent incapacity. Financial distress can result from a lack of skilled labor and possible workers’ compensation insurance claims.

Some methods to avoid MSDs involve dropping materials as close as possible to where they’ll be deployed or installed. Heavy loads should be transported by carts, dollies, and lifting tables. Innovative tools that cut down on muscle strain and overexertion should replace less modern items. Analyze work processes to identify how efficiency and proper ergonomics can be optimized.

6. Noise

It’s no secret that construction jobsites are noisy. But that noise can be more than a simple annoyance: High levels of noise exposure can cause permanent hearing loss. The impairment occur gradually without an employee recognizing that damage is occurring. While other injuries can often be corrected, hearing loss is neither reversible nor curable. Thus, prevention becomes a key concern for your construction employees.

Employees may be unaware of unsafe noise levels, so continual detection helps reduce the chance of hearing loss. According to OSHA Standard 1910.95, the permissible noise exposure limit for an 8-hour shift is 90 dbA (A-weighted decibels) — similar to the noise level of a leaf blower or a music concert. (A 2000 report from the Workers Compensation Board of British Columbia found that nearly all construction equipment operates at or above 90 db.) If employees are exposed to noise above established limits, employers must provide personal protective equipment such as adequate ear protection.

If the time-weighted average (i.e., sound levels averaged over the work period) exceeds 85 A-weighted decibels, OSHA requires employers to notify employees, monitor noise levels, and implement a hearing conservation program, among other requirements.

7. Air contaminants

Construction workers are often exposed to fumes, vapors, gases, dust, and other contaminants on the jobsite. These contaminants are inhaled through the mouth and nose, the most common routes of entry. Though less common, swallowing hazardous airborne particles must also be accounted for in safety protocols. According to a CDC survey in 2010, more than half of all construction workers report at least two exposures weekly to such contaminants.

One common contaminant, crystalline silica, is found in masonry and concrete products. Exposure to silica may result in a condition known as Silicosis, which can lead to respiratory disease and even death.

PPE becomes an integral part of how contractors manage risk of air contamination. Masks and respirators must be used where contaminants come into play. Monitoring constantly changing unsafe levels of contaminants helps drive new safety protocols while adequate ventilation in closed spaces also helps lessen the chance that employee health issues can arise.

Planning for contaminants allows you to provide employees with the appropriate barriers to possible illnesses and injuries.

8. High temperatures

Construction work in hot climates can have severe health implications when overexposure factors into the equation. Heat stroke is one of the most common conditions that you must prevent when working in extreme temperatures.

Dangerously, heat stroke is often difficult to diagnose. Afflicted workers are typically suffering from impaired judgment and have trouble describing their symptoms. Contractors should create a plan for recognizing and treating symptoms work is done in full sun and the heat index rises.

OSHA recommends several steps to reduce heat illness on the jobsite:

Drink cool water (1 cup every 30 minutes)

Take rest breaks

Find shade

Dress for the heat

Watch out for each other

Change masks or face coverings if they get wet or soiled

This is especially important for new employees who haven’t acclimatized to working in the heat. OSHA reports that nearly 3 in 4 heat-related fatalities occur during the first week of work. As a result, they recommend the “20% Rule:” On a worker’s first day, don’t allow them to work more than 20% of their normal shift in the full heat intensity. Increase their work time by no more than 20% each day until they acclimatize to the working conditions.

The true cost of health & safety hazards

Besides the obvious humane angle, there are many financial risks that come with health and safety hazards on the job.

Lost days at work can impact the scheduled timeline and projected profitability of a job. Skilled labor will be more difficult to come by if your company has a track record of unhealthy and unsafe business practices. Higher volumes of workers’ compensation claims will cause policy premiums to skyrocket, adding yet another unwanted expense to your operations.

And while the timely completion of a project is critical, nothing holds more importance than the safety and well-being of your employees.

Read More: Common Construction Risks and How to Manage Them

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Insurance for HVAC Contractors: What It Covers and Why You Need It

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Heating, ventilation, and air conditioning (HVAC) contractors must protect their business property while reducing the odds that a job-related accident or injury could financially harm their business. Damaged or stolen tools and equipment can erase a considerable investment, and bearing responsibility for damage to another person’s property can mean significant costs for an HVAC business.

HVAC contractor insurance is the primary way to help protect your financial interest if things go wrong on the job. A business policy covers many common hazards and perils you might face during the course of construction. This contractor’s insurance solution is typically the most cost-effective means to secure coverage and give you peace of mind.

What is HVAC contractor insurance?

HVAC insurance takes the form of a business insurance package commonly offered by all carriers that issue contractor policies. The policy will help indemnify your business or another party if either of you suffers some financial loss due to a work-related accident, theft, illness, etc.

The policy includes two main components that help protect the financial standing of the business. Business property insurance covers the value of materials you own to perform your job. Liability insurance will help cover expenses for damage to someone else’s property and/or legal costs if another party decides to file a lawsuit.

Unique situations could arise for HVAC contractors when installing heating units in residential or commercial buildings. A faulty connection in a heating unit could lead to a fire that results in minor or major property damage. In either case, your HVAC policy will help cover the cost of replacement or repair for the owner of the project if you or an employee is found to have some fault in the cause of the accident.

Who needs HVAC insurance?

If you work on a job with a general contractor, the contract itself may require that all subcontractors have insurance before the job can begin. This requirement helps assure project owners that all parties have proper coverages in place. The contract may ask that each sub carry a liability amount of $2 million, for example. Often, this amount will exceed the total cost of the project for the owner’s optimal protection.

As you can see from the liability amount that could be contractually required, a catastrophic loss can severely harm an HVAC business if insurance is not in place. If you were found responsible for the cause of significant property damage or personal injury during your business operations, legal expenses and possible jury awards could drain much, or all, of your business assets.

Insurance Policies HVAC contractors need

You can tailor an HVAC business insurance program to meet your needs. Policies cover a number of other situations beyond basic liability and business property coverage.

Business owners policy: This policy includes the foundation of property and liability coverages referred to thus far. It may require some customization to suit your HVAC operations.

Commercial auto insurance: A business auto policy covers the value of your vehicles or provides you coverage in case of damage to another party’s property. It also helps cover costs associated with a passenger or pedestrian injury.

Equipment floater insurance: You may own unique tools and equipment, the value of which exceeds the coverage amount provided by a base policy. This policy or policy endorsement helps get you that extra coverage.

HVAC Inland marine insurance: When traveling from project to project, inland marine insurance covers tools and equipment wherever you go.

Professional liability insurance: A professional liability policy or errors and omissions insurance can help protect your HVAC business if it were held responsible for an oversight or design flaw that caused financial harm to another party.

Surety bonds: A surety bond can help indemnify a project owner if your HVAC business could not meet its performance obligations under the terms of a construction contract.

Installation floater: This policy or amendment covers building materials wherever they’re located. The coverage applies to roofing shingles, for instance, destined to become part of a permanent structure.

Workers’ compensation insurance: If you have HVAC employees, this insurance helps cover lost income and/or medical expenses if one of your workers becomes sick or injured on the job.

How do I get HVAC insurance?

To get an HVAC contractor’s policy, the insurer will ask for specific information. Aside from contact info and an employer identification number (EIN), the company might require payroll and sales information. Often, policy rates are derived from one of these two factors. If you currently have HVAC insurance, the carrier may also ask for a claims history related to your account.

To buy a basic HVAC policy, you can contact an insurance agent or broker who can guide you through the application process. If your needs reach further than what a core policy provides, the insurer may ask for additional information such as a stated value of tools and equipment, a financial statement, and credit history. After the carrier evaluates your business situation, the policy gets issued.

How much does HVAC insurance cost?

The cost of HVAC insurance depends on a few variables, including:

The nature of your business and the probability of claims occurrences (an HVAC contractor generally bears less risk than a roofing business, for example)

The number of your annual sales or the size of your payroll

The overall or scheduled value of tools and equipment you decide to insure

The location or radius of operations within which you do business

The number of claims you may have incurred in previous policy years

Your annual policy cost for HVAC insurance will likely have a minimum premium, even if you have a small operation. The minimum premium may average around $1,000 per year and escalate as any of the above factors dictate. HVAC insurance costs trend toward the lower side in most cases, as this business typically presents a low risk to an insurance company.

Taking the next steps to get insured

HVAC contractors tend to find insurance policies affordable. A broad spectrum of insurance solutions exist to fulfill your needs and obligations. Nearly every Property and Casualty broker and agent can customize a package that suits your business style and operation, and insurance stands as a critical protective measure you shouldn’t run without.

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Job Safety Analysis (JSA): What It Is and How to Do It

A job safety analysis (JSA) is an analysis of job tasks that seeks to identify hazards before they occur. The maximum federal OSHA penalty for violations can be up to $14,502 per violation. The benefits of JSAs can help contractors avoid fines and fines. For each task, JSAs also reduce workers compensation insurance premiums, saving contractors money and increasing profits. The goal in performing a JSA is Document the answers to these questions.

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First-Party vs. Third-Party Insurance: What’s the Difference?

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The difference between first party and third party insurance illustrated by two sets of documents labeled "first-party insurance" on the left and "third-party insurance" on the right, with a question mark between them. The illustration is layered over a photograph of a construction worker in a vest and hard hat facing away from the camera.

As you dig deeper into your construction insurance policy, you may come across the terms first-party insurance and third-party insurance. Mastering the difference between these two concepts is crucial to understanding how different types of construction insurance protect you. Fortunately, the difference is very straightforward.

First-party insurance provides compensation directly to the insured individual or business, whereas third-party insurance provides compensation to another party when the insured person or business is liable for damages.

Read on for more everything you need to know about first-party vs. third-party insurance in construction.

The difference between first-party and third-party insurance

First-party insurance provides compensation directly to the insured individual or business. For example, if your insurance policy covers your equipment, any damage that is covered will lead directly to you getting reimbursed for repairs or replacement.

Third-party insurance, also known as liability or casualty insurance, protects insured individuals or businesses in situations where they may be liable for damages to another person or business — the third party. For example, if you damage a customer’s property while performing electrical repairs, liability insurance may cover the cost of damages to the customer’s property.

	First-party insurance	Third-party insurance
Definition	First-party insurance provides reimbursement to the insured individual or business for covered claims during the coverage period.	Third-party insurance provides compensation to other individuals or businesses (third parties) when the insured individual or business is liable for damages.
Common contractor policies	Commercial auto, commercial property, and builder’s risk	Workers’ compensation, general liability, and professional liability
Example	A building in progress, insured by builder’s risk insurance, is damaged by a fire. The general contractor who has an insurable interest in the property is reimbursed for damages.	A customer trips on a ladder belonging to a roofer on a residential job site. The roofer’s general liability insurance covers claims related to injuries related to the customer’s fall.

A simple way to think about first-party and third-party insurance coverage is to ask yourself the following question: Who ultimately receives the financial compensation from the policy?

With first-party insurance, the policyholder receives compensation, but with third-party insurance, someone else that the policyholder is liable to receives compensation.

However, both forms of insurance are known as risk transfer policies in construction insurance because they shift unknown future costs away from the policyholder and onto the insurance company — an excellent prospect for contractors working in complex and risky fields.

First-party insurance examples

There are a number of first-party insurance policies that are common in the construction industry. Taking a closer look at each type of policy makes it easier to understand how the first-party — the policyholder — is reimbursed for particular types of claims.

Commercial auto: When company vehicles are damaged — or employees driving those vehicles are injured — commercial auto provides reimbursement to the policyholder.

Commercial property: If a construction business’s insured property is damaged, it can file a claim for reimbursement from the insurance carrier.

Builder’s risk: Also called course of construction insurance, builder’s risk provides reimbursement to policyholders for damage to buildings that are still under construction.

In these and other cases involving first-party policies, the construction business is receiving reimbursement directly for claims that are covered by the policy.

Third-party insurance examples

The two most common third-party insurance policies in construction are general liability insurance and professional liability insurance, also known as errors and omissions (E&O) insurance. Both of these policies cover contractors in situations where their work leaves them potentially liable for damages to a third party.

Workers’ compensation: Legally required, workers’ compensation provides an injured worker with reimbursement for employee medical costs.

General liability insurance: Required for most construction jobs and for many state licenses, general liability insurance protects the policyholder from claims that their work led to third-party property damage or bodily injury.

Professional liability insurance: Common among most contractors, professional liability insurance offers coverage in situations where a third party claims that a contractor’s work led to financial losses.

Liability insurance is vital for most construction businesses, as the financial losses that come from a liability claim — including potential legal fees and settlements — can be significant. Although the compensation these policies provide goes to third parties, the policyholder benefits by mitigating the risk of massive financial losses from a liability claim.

In this way, third-party insurance is similar to bonds, which many construction businesses are required to have when working on government projects.

For example, payment bonds are purchased by general contractors to ensure that subcontractors are paid for their work — protecting owners from potential lawsuits. And performance bonds, which are purchased by subcontractors, ensure that work will be completed for the GC and owner, even if the subcontractor leaves the job unfinished. In both cases, a third party (not the contractor who secured the bond) receives the benefit of the bond, which effectively functions as a form of insurance.

Bad faith insurance claims

When a policyholder makes a claim with their insurance carrier, the carrier has a responsibility to investigate the claim and provide payment if obligated. This responsibility exists for both first-party and third-party insurance policies, since either kind of claim could result in compensation for the affected party.

If a contractor believes that their insurance carrier has misrepresented contract terms, willfully avoided providing reimbursement, or is otherwise failing to live up to its contractual obligations, they are generally able to file a claim that the insurance carrier is acting in bad faith.

Importantly, an insurance company that has made a simple mistake or has correctly denied a claim based on the contract cannot be held in bad faith. Additionally, not all states have laws enabling policyholders to make bad faith claims. In some cases, states allow for bad faith claims for first-party claims but not third-party claims, so it’s best to consult a construction attorney for more information about your specific situation.

Construction insurance coverage is key

With a firm knowledge of first-party and third-party insurance, you’ll be able to take a closer look at specific construction insurance types and the benefits they provide to construction businesses.

While the initial cost of construction insurance may seem burdensome, the ability to mitigate risk, avoid costly liability claims, and get reimbursed for covered damages ultimately helps contractors stay in business.

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Types of Capital for Construction Businesses

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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.

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How to Start a Roofing Business: 9 Tips to Grow & Thrive

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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:

Keeps everyone on the same page

Saves supervisors from having to repeat information

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 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.

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1 year ago

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Contractor License Bonds: Everything You Need to Know

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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.

Chart illustrating the 3 parties to a contractor bond: The obligee, the principal, and the surety.

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:

A Bond of Qualifying Individual for when the qualifier is a responsible managing employee OR when a responsible managing member, manager, or owner has less than 10% stock ownership

An LLC Employee/Worker Bond when the business entity is licensed as an LLC

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:

Unfinished work or complete project abandonment

Damage to property

Deviation from contract specifications

Excessive progress payments

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

Failing or refusing to pay wages/dues in a timely manner

Obligees can file a claim for:

Failing to pay licensing or other fees

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.

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1 year ago

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How to Start a Painting Business: 9 Keys to Growth & Success

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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.