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Starting a New Contracting Business Affordably

Contracting businesses took a big hit when the housing bubble burst, slowing construction way down. However, construction has been in steady comeback mode in recent years, so it isn’t surprising that we see a number of new organizations looking to get in – or back in – on the action. Naturally, if you’re one of these people, starting a new contracting business affordably is what’s on your mind.

However, since the burst of the bubble, everything costs more. And a contracting business carries with it an overabundance of overhead. Here is just a small list:

●           Licensing

●           Bonding

●           Business Insurance

●           Health Insurance

●           Labor

●           Tools

●           Equipment

●           Advertising…

However, the one item that is underestimated and usually turns out to be the most constant expense is your company is the equipment. It’s hard enough to decide what you want in a truck. You may also be thinking about whether you can get what you need by purchasing a truck, or securing commercial rental trucks.

At this point, if you haven’t done so already, some serious planning is in order. It’s a matter of figuring how much you can afford to pay each month for expenses.. Remember, the idea is starting a new contracting business affordably..

Here’s some advice: This step should not be ignored. If you are not good at planning or budgeting, then you have two choices:

  1. Learn it, to a reasonable degree, or
  2. Hire or partner with someone who is knows it.

A budget gives you a clear path to where you want to go in your business If you decide to ignore this step you can surely expect tons of surprises.

For example, your plan is to spend $300 per month on your vehicle payment, and maybe $200 on tools per month. Then one month you see a tool that would help you big time on the job. But it costs $300. If you decide to buy that tool, then you have endangered your vehicle payment budget. This might prompt you to “borrow” from another item, but this will only begin a vicious cycle. It’s better to wait until one item requires less outgo so the extra can be redistributed to the tools part of the budget.

Let’s take a look at purchasing a truck. You may have a sizeable down payment. You’re likely to have a high payment and your insurance will be higher. Will you be able to manage that while building your clientele?

On the other hand, maybe you would like to consider renting the expensive equipment. There are some considerable advantages to this:

  • You may not be required to shell out a lot of cash for a down payment.
  • Lower fees
  • Tax advantages – you can deduct all vehicle expenses
  • You only have to turn in the vehicle once the lease is up

And there could be more than we can list here, but you get the idea.

So if purchasing a truck for your contracting business just isn’t in the budget, then maybe leasing trucks is the way to go for now. Once you have enough business coming in that you can reinvest, then perhaps you will be in a better position to buy.

Or, if you discover that commercial rental trucks works for you and your business, then after your lease is complete, you will definitely be in a good position to negotiate a better deal on a new lease.

So in your thought process while starting your new contracting business affordably, look at your current resources, compare the cost of leasing versus buying, and figure out which one fits your budget.