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You might consider targeting a niche market by specializing in a certain aspect of your industry such as kitchen remodels.
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Written by: Carolyn Young
Carolyn Young has over 25 years of experience in business in various roles, including bank management, marketing management, and business education.
Published on January 19, 2022
Updated on December 25, 2022
Investment range
$2,550 - $7,100
Revenue potential
$120,000 - $300,000 p.a.
Time to build
0 – 3 months
Profit potential
$96,000 - $120,000 p.a.
Industry trend
Growing
Commitment
Flexible
Homeowners periodically like to update their spaces to “keep up with the Joneses”, and they pay significant prices to do so. The U.S. remodeling industry is worth over a massive $110 billion and has grown by over 50% in the last decade. Remodeling skills are clearly very valuable and starting your own remodeling business can put those skills to work and help you to cash in on a piece of that multi-billion-dollar market.
It sounds easy but starting a remodeling business takes more than a hammer and nails. Hard work and business expertise will be your keys to success, and luckily this step-by-step guide has all the advice and insight to give you that expertise. The rest of the hard work is up to you!
Starting a remodeling business has pros and cons to consider before deciding if it’s the right path for you.
Some of the latest trends in home remodeling include:
Challenges also exist in the industry, which include:
Startup costs for a remodeling business range from $2,500 to $7,000. The main costs are for a website setup and tools. If you already have tools, your costs will be less. If you don’t have a vehicle to transport your tools and other materials, you’ll need to add in that cost.
You’ll need a handful of items to successfully launch your remodeling business, including:
Start-up Costs | Ballpark Range | Average |
---|---|---|
Setting up a business name and corporation | $150-$200 | $175 |
Business licenses and permits | $100-$300 | $200 |
Business cards and brochures | $200-$300 | $250 |
Insurance | $100-$300 | $200 |
Tools | $1,000-$3,000 | $2,000 |
Website setup | $1,000-$3,000 | $2,000 |
Total | $2,550-$7,100 | $4,825 |
Bathrooms and kitchens are the most common remodeling jobs. The average bathroom costs about $10,000 and the average kitchen remodel costs $25,000. When you’re just starting out, your jobs will probably fall into the $10,000 range. Working with one laborer, your profit margin should be about 80%.
In your first year or two, you could run your business from home and do 12 jobs in a year, bringing in $120,000 in annual revenue. This would mean $96,000 in profit, assuming that 80% margin. As your brand gains recognition, sales could climb to 20 jobs a year that are at a higher price point of $15,000. At this stage, you would hire additional labor, reducing your profit margin to around 40%. With expected annual revenue of $300,000, you would make about $120,000.
There are a few barriers to entry for a remodeling business. Your biggest challenges will be:
Now that you know what’s involved in starting a remodeling business, it’s a good idea to hone your concept in preparation to enter a competitive market.
Research remodeling businesses in your area to examine their services, price points, and customer reviews. You’re looking for a market gap to fill. For instance, maybe the local market is missing a remodeler who specializes in tile.
You might consider targeting a niche market by specializing in a certain aspect of your industry such as kitchen remodels.
This could jumpstart your word-of-mouth marketing and attract clients right away.
Your services will depend on your skills or the labor that you can find. Your remodeling may involve:
All of your prices should be broken down into all the tasks that are involved in the job. For example, for tile flooring, you’ll charge by the square foot. The average price for tile floor installation ranges from $14 – $21 per square foot. Your customer will typically pay for all materials. HomeWyse is a good resource for labor prices. Once you have a full crew you should aim for a profit margin of about 40%.
Once you know your costs, you can use this Step By Step profit margin calculator to determine your mark-up and final price point. Remember, the price you use at launch should be subject to change if warranted by the market.
Your target market will be homeowners who are typically a more established group. You can find them on Facebook or LinkedIn. You can also, however, partner with realtors to get referrals, and LinkedIn is a great place to connect with them.
In the early stages, you may want to run your business from home to keep costs low, and you’ll probably continue to do business this way. If you ever decide that you need an office, you can find commercial space to rent in your area on sites such as Craigslist, Crexi, and Instant Offices.
When choosing a commercial space, you may want to follow these rules of thumb:
Your business name is your business identity, so choose one that encapsulates your objectives, services, and mission in just a few words. You probably want a name that’s short and easy to remember, since much of your business, and your initial business in particular, will come from word-of-mouth referrals.
Here are some ideas for brainstorming your business name:
Once you’ve got a list of potential names, visit the website of the US Patent and Trademark Office to make sure they are available for registration and check the availability of related domain names using our Domain Name Search tool. Using “.com” or “.org” sharply increases credibility, so it’s best to focus on these.
Finally, make your choice among the names that pass this screening and go ahead with domain registration and social media account creation. Your business name is one of the key differentiators that sets your business apart. Once you pick your company name, and start with the branding, it is hard to change the business name. Therefore, it’s important to carefully consider your choice before you start a business entity.
Every business needs a plan. This will function as a guidebook to take your startup through the launch process and maintain focus on your key goals. A business plan also enables potential partners and investors to better understand your company and its vision:
If you’ve never created a business plan, it can be an intimidating task. You might consider finding and hiring a business plan specialist at Fiverr to create a top-notch business plan for you.
Registering your business is an absolutely crucial step — it’s the prerequisite to paying taxes, raising capital, opening a bank account, and other guideposts on the road to getting a business up and running.
Plus, registration is exciting because it makes the entire process official. Once it’s complete, you’ll have your own business!
Your business location is important because it can affect taxes, legal requirements, and revenue. Most people will register their business in the state where they live, but if you’re planning to expand, you might consider looking elsewhere, as some states could offer real advantages when it comes to remodeling businesses.
If you’re willing to move, you could really maximize your business! Keep in mind, it’s relatively easy to transfer your business to another state.
Business entities come in several varieties, each with its pros and cons. The legal structure you choose for your remodeling business will shape your taxes, personal liability, and business registration requirements, so choose wisely.
Here are the main options:
We recommend that new business owners choose an LLC as it offers liability protection and pass-through taxation while being simpler to form than a corporation. You can form an LLC in as little as five minutes using ZenBusiness’s online LLC formation service. They will check that your business name is available before filing, submit your Articles of Organization and be on hand to answer any questions you might have.
The final step before you’re able to pay taxes is getting an Employer Identification Number, or EIN. You can file for your EIN online or by mail or fax: visit the IRS website to learn more. Keep in mind, if you’ve chosen to be a sole proprietorship you can simply use your social security number as your EIN.
Once you have your EIN, you’ll need to choose your tax year. Financially speaking, your business will operate in a calendar year (January–December) or a fiscal year, a 12-month period that can start in any month. This will determine your tax cycle, while your business structure will determine which taxes you’ll pay.
The IRS website also offers a tax-payers checklist, and taxes can be filed online.
It is important to consult an accountant or other professional to help you with your taxes to ensure you’re completing them correctly.
Securing financing is your next step and there are plenty of ways to raise capital:
Bank loans or SBA loans are probably the best options for funding a remodeling business, or you can just use personal funds since the startup costs are low.
Starting a remodeling business requires obtaining a number of licenses and permits from local, state, and federal governments. Depending on the type of work that you do and your state’s requirements you may need a contractor’s license. Check with your state to find out what is required.
Federal regulations, licenses, and permits associated with starting your business include doing business as, health license and permit from the Occupational Safety and Health Administration (OSHA), trademarks, copyrights, patents, and other intellectual properties, as well as industry-specific licenses and permits.
You may also need state-level licenses and local county or city-based licenses and permits. The license requirements and how to obtain them vary, so check the websites of your state, city, and county governments or contact the appropriate person to learn more.
You could also check this SBA guide for your state’s requirements, but we recommend using MyCorporation’s Business License Compliance Package. They will research the exact forms you need for your business and state and provide them to ensure you’re fully compliant.
This is not a step to be taken lightly, as failing to comply with legal requirements can result in hefty penalties.
If you feel overwhelmed by this step or don’t know how to begin, it might be a good idea to hire a professional to help you check all the legal boxes.
Before you start making money, you’ll need a place to keep it, and that requires opening a bank account. Keeping your business finances separate from your personal account makes it easy to file taxes and track your company’s income, so it’s worth doing even if you’re running your remodeling business as a sole proprietorship.
Opening a business bank account is quite simple, and similar to opening a personal one. Most major banks offer accounts tailored for businesses — just inquire at your preferred bank to learn about their rates and features.
Banks vary in terms of offerings, so it’s a good idea to examine your options and select the best plan for you. Once you choose your bank, bring in your EIN (or Social Security Number if you decide on a sole proprietorship), articles of incorporation, and other legal documents and open your new account.
Business insurance is an area that often gets overlooked yet it can be vital to your success as an entrepreneur. Insurance protects you from unexpected events that can have a devastating impact on your business.
Here are some types of insurance to consider:
As opening day nears, prepare for launch by reviewing and improving some key elements of your business.
Being an entrepreneur often means wearing many hats, from marketing to sales to accounting, which can be overwhelming. Fortunately, many websites and digital tools are available to help simplify many business tasks.
You can use industry-specific software, such as HCSS, PROCORE, or FieldWire, to help manage your projects, workflow, costs, billing, and scheduling.
Some of your business will come from the casual online visitors, but still, you should invest in digital marketing! Getting the word out is especially important for new businesses, as it’ll boost customer and brand awareness.
Once your website is up and running, link it to your social media accounts and vice versa. Social media is a great tool for promoting your business because you can create engaging posts that advertise your products:
Take advantage of your website, social media presence and real-life activities to increase awareness of your offerings and build your brand. Some suggestions include:
Website development is crucial because your site is your online presence and needs to convince prospective clients of your expertise and professionalism. They are unlikely to find your website, however, unless you follow Search Engine Optimization (SEO) practices. These are steps that help pages rank higher in the results of top search engines like Google.
You can create your own website using services like WordPress, Wix, or Squarespace. This route is very affordable, but figuring out how to build a website can be time-consuming. If you lack tech-savvy, you can hire a web designer or developer to create a custom website for your business.
Unique selling propositions, or USPs, are the characteristics of a product or service that sets it apart from the competition. Customers today are inundated with buying options, so you’ll have a real advantage if they are able to quickly grasp how your remodeling business meets their needs or wishes. It’s wise to do all you can to ensure your USPs stand out on your website and in your marketing and promotional materials, stimulating buyer desire.
Global pizza chain Domino’s is renowned for its USP: “Hot pizza in 30 minutes or less, guaranteed.” Signature USPs for your remodeling business could be:
You may not like to network or use personal connections for business gain. But your personal and professional networks likely offer considerable untapped business potential. Maybe that Facebook friend you met in college is now running a remodeling business, or a LinkedIn contact of yours is connected to dozens of potential clients. Maybe your cousin or neighbor has been working in remodeling for years and can offer invaluable insight and industry connections.
The possibilities are endless, so it’s a good idea to review your personal and professional networks and reach out to those with possible links to or interest in remodeling. You’ll probably generate new customers or find companies with which you could establish a partnership.
If you’re starting out small from a home office, you may not need any employees. But as your business grows, you will likely need workers to fill various roles. Potential positions for a remodeling business would include:
At some point, you may need to hire all of these positions or simply a few, depending on the size and needs of your business. You might also hire multiple workers for a single role or a single worker for multiple roles, again depending on need.
Free-of-charge methods to recruit employees include posting ads on popular platforms such as LinkedIn, Facebook, or Jobs.com. You might also consider a premium recruitment option, such as advertising on Indeed, Glassdoor, or ZipRecruiter. Further, if you have the resources, you could consider hiring a recruitment agency to help you find talent.
Who knew that remodeling was such a huge industry? Over $110 billion is an astounding number, and you can make good money by getting just a small chunk of it with your remodeling business. You can run your business from home and get started with little out-of-pocket cash.
All you need are tool skills and a willingness to get your hands dirty, you can build a lucrative company. Now that you’re a business expert, strap on that tool belt and get to work on launching your new remodeling business!
You can start a remodeling company for around $2,500 which includes building a website and acquiring tools. If you already have the tools, you can start for even less.
The average bathroom remodel costs about $10,000, so if you do just 10 bathrooms a year, your revenue will hit 6 figures. Even if you do smaller jobs, the money can add up.
You probably need a contractor’s license and other business licenses and permits at the state and local levels. Check with your local government for requirements, or visit MyCorporation’s Business License Compliance page.”
You will need to break down your jobs into each task that you’ll be completing. For example, you’ll compute a price to tear out old items, install cabinets, install flooring (by square foot), paint, and do any other tasks. HomeWyse is a good resource to find average labor costs per task.
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