How to Start a Remodeling Business (Look Out, Chip and Joanna!)

Do You Need a Contractor License to Start a Remodeling Business?

Typically, yes. Working as a home improvement contractor comes with risks, which is why many states require a contractor license. The rules vary from state to state, so keep in mind that you may need to meet different requirements if you work in more than one state.

The licensing process usually requires passing a test to ensure a minimum level of competency. You should always comply with your state’s standards to ensure your business’s success.

Our contractor licensing hub breaks down the process by state to get the license you need to start a renovation business.

How to Start a Home Renovation Business: Your Step-by-Step Guide

1. Make a plan.

Before starting your home renovation company, spend some time thinking about how much time and money you can put into the business.

On average, a part-time professional remodeler will need about $50,000 to $75,000 to get started. This would cover the cost of all the necessary tools, a truck or van, and the proper licensing and insurance.

The average start-up costs for a major home renovation business could be in the range of $250,000 to $500,000. When your business takes on large renovation projects, you’ll need to pay for most materials upfront. And you'll also have subcontractors to pay.

Defining the scope and vision for your home remodeling business will be time well spent and will help you map out your company's future.

Starting small.

If you’re not ready to take on Chip and Joanna just yet, that’s OK. You can start small by taking on projects within your wheelhouse. That way, you may already have many of the tools and skills you need to get started.

And it's OK if you're still learning. If you’re an excellent carpenter who doesn’t know much about plumbing, try to gain experience by finding an entry-level opening on a job site. Continue to work your way up, gaining new skills in every area of the home.

Carving out a niche for yourself is another way to put your small business on a path to success. Let’s say you have a knack for designing mudrooms. Your first client asks you to build a functional mudroom for their growing family. The new mudroom becomes the envy of the neighborhood, and suddenly everyone wants to hire you. You just grew your business without even trying!

Starting small doesn’t limit your future growth. It helps you focus on your strengths right now. That may mean specializing in one or two areas. Here are some of the popular remodeling trends you could focus on:

• Home offices
• Mudrooms
• Spa-inspired bathrooms
• Basement and attic remodeling
• Outdoor living spaces

Going big.

If you think you’re ready to launch a major home renovation business, it’s time to write a solid business plan. This will help you establish your goals and learn everything involved with starting and running your business.

When it comes to how to start a remodeling business, you’ll also need the start-up money to fund it. If you don’t have enough money upfront, you may need to secure a loan — which is another reason why you’ll need that business plan.

Lenders will generally require a business plan outlining specific goals. Typical details in a business plan would include information such as:

• What services will I provide?
• What experience do I have?
• Who is my target market?
• How many employees will I hire?
• How much money will it cost to start the business?
• How much profit will I make in the first year?

We can help get you started here with a business plan template designed specifically for small business owners. If you’re still uncomfortable writing a business plan, you can always hire a professional to help you.

2. Make it official.

Naming your business.

You’ve set your goals. Now it’s time to come up with a business name. While this is a serious task, it’s also time to have some fun. After all, you’re in the business of making homeowners’ dreams come true! Get creative and choose a name that will inspire potential clients and get you noticed.

If you get stuck, reach out to friends and family to brainstorm some unique names. We have a bit of inspiration for you with some of the funniest and creative contractor business names.

It’s always good to have a couple of options just in case Jack Hammer Construction is already taken. Spoiler alert, it is. Check with your state’s filing agency and the U.S. Patent and Trademark Office to make sure no other business is using the name you’re considering.

Registering your business.

With your name in place, it’s time to register your business. There are a few ways you can set your business up, and each comes with its own pros and cons, as well as its own legal requirements and fees.

When deciding on any business structure, It’s a good idea to consult with an attorney or business advisor.

Sole proprietorship: A sole proprietorship links you, the owner, to your company. This business structure is easy to form, inexpensive, and offers tax benefits. But it does not protect you from personal liability.

Corporation: A corporation model allows the business to operate as a separate entity, protecting you from personal liability. Corporations often cost more to set up than other structures, and they require more extensive record-keeping, operational processes, and reporting.

Limited Liability Corporations (LLCs): An LLC offers a combination of tax benefits and liability for small business owners. This is often the preferred way to set up a business for starting out in the home renovation industry.

Now that you have a name and have decided how you want to register your business, you can reach out to your local Small Business Administration office to get the information you need to get started.

Again, don’t forget the license!

Most states will require a contractor’s license, so this is the time to research the proper licenses and permits you’ll need to avoid any legal trouble down the road.

3. Protect yourself.

Remodeling contractor insurance: A must-have!

It's no surprise that many homeowners won’t even let you in the door if you’re not licensed and insured. There are just too many things that can go wrong, and a contractor who doesn’t operate safely and lawfully is a red flag to potential clients.

Your insurance requirements will depend on the specific nature of your business. But the bottom line is that you very likely need home improvement contractor insurance to protect you and your company’s well-being. The last thing you want is to leave yourself or your business exposed to risk or loss.

General liability insurance.

For home improvement contractors, the most common coverage is general liability insurance. It provides coverage against costs associated with third-party accidents, property damage, and bodily injury. In most states, general liability insurance is required in order to get your contractor’s license. In any case, it’s unwise for a contractor to operate without it.

Because let’s face it, anything can happen when you’re demolishing a kitchen or operating a table saw. You may unintentionally damage a wall or cause injury to a client.

Without general liability insurance, you may be forced to pay for those accidents and damages out of your own pocket. And those costs can be substantial. It’s estimated that the average claim for property damage for small businesses is $30,000.

That’s why having a comprehensive general liability insurance policy that covers these risks is essential:

• Bodily injury to another person (e.g., a client)
• Third-party property damage
• Personal and advertising injury
• Medical expenses
• And more

Let’s go back to that kitchen demolition. Say you swing your sledgehammer a little too far and hit a load-bearing wall. The structure becomes unstable and begins to show signs of collapse. It was an innocent mistake, but now there’s a substantial repair added to the job — and you’re on the hook for the cost of repairs.

The good news is that your contractor insurance with general liability coverage would most likely cover the cost of repairs, up to your policy’s limit.

It usually takes just 10 minutes online or when you speak with one of our licensed insurance agents, so you could get covered on your coffee break.

Workers compensation insurance.

It goes without saying that when you begin hiring a crew and staff to support your business, the risk of unforeseen events and accidents will increase. If you have employees — even if they’re part-time or temporary — your state may require you to have workers compensation insurance.

Here is what workers compensation generally covers:

• Medical payments
• Lost wages
• Rehabilitation expenses
• Death benefits

Workers compensation can provide much-needed security, as this coverage prevents an employee from bringing legal action against your home renovation business for workplace injuries.

4. Build relationships.

The success of your home renovation business will rely heavily on the company you keep. Whether it’s the relationship with your clients, suppliers, or employees, it is the key to a harmonious and prosperous business model.

Your crew.

You landed a big job, and now you need to line up the talent to get the job done. As the owner of a home renovation business, you’re responsible for hiring a team of subcontractors to complete the project.

If you don’t already have a list of plumbers, roofers, and electricians you trust, you can find qualified and licensed tradespeople through organizations like BuildingConnected and AGC.

It’s always beneficial to meet with new subcontractors in person to get a better sense of their working style and communication skills. In addition, you may need to add an administration employee to handle payroll or act as a liaison with your clients.

Your vendors.

These are the people who supply you with materials for your home renovating business. They're your collaborators — and you may even find that they become like family over time. Long-lasting relationships with suppliers and vendors are crucial to success and are most often the result of mutual trust and support.

Always pay your suppliers and vendors on time and keep an open line of communication. This will go a long way in nurturing a solid partnership — even in the most challenging times. Hello, 2020!

Your clients.

When a homeowner hires you to transform their home, they count on you to bring their dreams to life. No pressure there, right? If you take the time to understand their needs and keep an open line of communication, you can build a solid foundation for a successful remodel.

Better still, happy clients are more likely to hire you for another job, refer you to friends, and write five-star reviews on your website.

5. Market your business.

Using word of mouth is a great way to gain new clients, but you’ll need to put more time and effort into marketing your remodeling business if you want to remain relevant and competitive.

Branding.

You came up with and registered that catchy company name. This is the first step toward building your brand. Next, you’ll want to consider designing a logo to give your business a strong identity. If you’re not design-savvy enough to create a logo, you can hire a freelancer to design something that will fit your brand’s personality.

Website.

One of the first things a potential client will ask is, “Do you have any photos of your work?” Your website is an essential marketing tool. It highlights the work you’ve done, the services you provide, and hopefully hosts a lot of five-star reviews from happy clients.

Creating a website doesn’t have to be a major project. We can help get you up and online in no time with this article.

Advertising.

There are many ways to advertise your business. Begin by thinking about who you're targeting, how much money you want to spend, and how creative you want to get.

A traditional path would be to place ads in local newspapers, send direct mail to people’s homes, or promote your business more heavily on social media (e.g., Facebook or Instagram).

Whatever you do, don’t forget to capitalize on the fact that before-and-after makeovers are impossible to ignore. Here are some creative content ideas for sharing your renovation projects in a unique and compelling way.

We also have some ideas specifically for contractors that can help.

Are You Ready to Break Ground as a Home Remodeler?

You have the passion, the skills, and the marketing know-how. You may even have a few clients ready for you to make their dreams come true.

Now that you know how to start a home renovation business, it's clear that it comes with a great deal of responsibility. Having the right insurance coverage is one more tool in your toolbox that will set your business up for success.