How to start a remodeling business

Start with the projects you can run start to finish with trades you trust, and say no to the rest until you can.

Most states license contractors who do remodeling, often with a dollar amount below which no license is needed, and some have separate home improvement registrations with rules about written contracts and deposits. Cities require permits for most structural, plumbing and electrical work, and the trades you hire may need their own licenses. Our general contractor licensing guide covers each state.

The EPA's lead rule covers paid work that disturbs paint in homes and child-occupied facilities built before 1978, names general contractors among the firms covered, and says firms cannot advertise or do covered work without firm certification. The EPA also suggests an asbestos inspection by an accredited professional before remodeling a home.

OSHA says fall protection is required at six feet in construction. Once you have a crew on second floors and roofs, plan for it.

The SBA lists the launch steps in this order: pick a location, choose a structure, choose a name, register, get federal and state tax ID numbers, apply for licenses and permits, open a business bank account, and get insurance. For a remodeling company working out of a truck, the location is usually your home address and the area you will serve.

• Structure. A sole proprietorship is the simplest. An LLC keeps the business separate on paper. Ask an accountant which fits your state and your plans.
• Tax ID. The IRS gives out an employer identification number (EIN) online, and says you never have to pay a fee for one. Websites that charge for an EIN are not the IRS.
• Self-employment tax. The IRS lists the self-employment tax rate as 15.3%: 12.4% for Social Security and 2.9% for Medicare. Income tax comes on top, so set money aside from every job.
• Bank account. Open it before the first payment lands, so every dollar in and out is easy to find at tax time.

Your name goes on the truck, the invoices, the Google profile and the yard signs, so pick it once. The free remodeling name generator gives 36 ideas for your town and style, each with a domain idea, and lists the checks to run before you commit: your state's business name search, a federal trademark search and the domain itself.

The SBA describes general liability insurance as cover for financial loss from bodily injury, property damage, medical expenses and defending lawsuits. It says businesses with employees are required to carry workers' compensation, unemployment and disability insurance, and some states ask for more.

Remodeling claims range from water leaks to structural problems found years later. Ask your agent about general liability including completed work, builder's risk on larger projects, commercial auto, and workers' compensation. Ask your subcontractors for their certificates too.

No total here on purpose. What you spend depends on what you already own, new or used, and how much work you plan to take on. Price your own list with a local supplier, then put the numbers in the startup cost table of the free business plan template, which adds them up for you.

• A truck and enclosed trailer for tools
• Saws: miter, table, circular and reciprocating
• Drills, drivers, nail guns and a compressor
• Levels, lasers and measuring tools
• Dust control: plastic, zip walls, HEPA vacuum, floor protection

Tools are the smaller part of the startup cost. Cash to carry material and payroll between payments is the larger one, so plan your deposits and stage payments with that in mind.

Build each bid from the scope: material with markup, your labor, each subcontractor's price, permits, dumpsters, and overhead and profit. The free markup calculator and profit margin calculator keep markup and margin straight, and the estimate generator makes a clean written bid. Give two or three options so the homeowner can pick a level of finish.

• Referrals. Remodeling runs on word of mouth. Koira asks happy customers if they know someone who needs you.
• Realtors. Buyers want to change what they just bought.
• The neighbors. A dumpster in the driveway gets attention. Koira mails nearby homes.
• Photos by project type. On your website and Google profile.

Send options the homeowner signs on their phone, take a deposit, and bill in stages tied to milestones. Check whether your state caps deposits on home improvement work. Offer financing on larger projects. If a bid goes quiet, Koira follows up.

Your first hire is often a lead carpenter who runs a job while you sell the next. Read how remodelers run on Koira.