How to Start a Remodeling Business

Part 1 - How to start a Remodeling business - Background

Your remodeling business might be a one person show where you personally complete kitchen, bathroom, bedroom remodels or additions to homes and businesses. In another business model, you could serve as a general contractor and hire employees or subcontractors to help complete jobs in a more efficient manner.

Our guide is in 3 parts:

• Part 1 - How to start a Remodeling business - Background
• Part 2 - Our planner tool to see if this idea is the right fit for you
• Part 3 - Action plan to get started

What are the costs involved in opening a remodeling business?

If you are simply offering up your own skills and time as a part-time remodeler, the start-up cost will be around $50,000 to $75,000 as you will need a complete set of tools, a vehicle for transporting tools and supplies, and the proper licensing and insurance in order to operate in your state and locality.  If you are looking to enter the business world offering major renovation services, expect to have start-up capital of $250,000 to $500,000 as you’ll need to be able to purchase your first few orders of materials and hire staff before your customer pays you for the completed job.

What are the ongoing expenses for a remodeling business?

You will need to maintain accounts with material suppliers, pay your crews on a regular basis, and maintain vehicles and tools. Fortunately, your office space can be fairly minimal.

Who is the target market?

Home and business owners who are seeking to have their property professionally renovated and are willing to pay a fair price for labor and materials. Large businesses that need renovating may have more space, allowing you to charge more for your work.

How does a remodeling business make money?

Your remodeling business generates income by charging your customers for labor and materials for their renovation. You are responsible for providing your own tools, as part of your trade.  However paint, hardware, lumber, flooring, and other supplies are purchased by you at wholesale prices and then you charge your customer for them at a premium price.  Your hourly labor costs will be determined by level of expertise, the type of job that is being completed, and local competitive rates.

How much can you charge customers?

Your rates will vary depending on size and complexity of the job. Rates vary from $45/hr to $85/hr and can be lower or higher. You will want to complete an extensive competitive comparison to ensure your client is getting a good value. The average renovation project costs between $3,000 and $15,000.

How much profit can a remodeling business make?

The typical markup on materials is 15%.  Income for a one-man company can be around $20,000 a year working part-time while a large contractor with multiple crews can see income in the seven figure range when they complete multiple large jobs over the year.

How can you make your business more profitable?

Ensuring quality work that completely satisfies your customer is the number one means of generating more business, and therefore additional profit. You will need to ensure the quality control and customer service are always of top priority for your successful remodeling business.

Day-to-Day and Growth

What happens during a typical day at a remodeling business?

Whether you simply manage the business or are swinging a hammer with the crew, you might be expected to:

• Participate in demolition, installation of flooring, walls, and cabinetry

• Source supplies and materials for the job site

• Maintain open communication channels with the customer, updating them on progress

• Schedule your reliable crews and subcontractors in a time-efficient manner

• Maintain proper licensing to operate in your state

• Train new crew members to maintain your high standards

• Complete punch lists after you finish a job

• Establish relationships with tool and materials vendors/suppliers

• Maintain payroll records/pay your crews on a timely basis

• Collect payment from customers

• Create contracts for customer approval

• Promote your business to generate new jobs for the future

What are some skills and experiences that will help you build a successful remodeling business?

Your remodeling business will find greater success when you have a wide range of skills under your belt as the owner/operator. These may include, but are not limited to:

• Solid understanding and experience in construction techniques with regards to kitchen, bathrooms, siding, windows, additions, and flooring

• Appreciation and knowledge of quality materials and their fair pricing structure

• Good accounting knowledge to maintain accurate records for accounts payable/receivable and payroll requirements

• Excellent time management that lines up additional crews to complete the next phase of construction without waiting

• Good ability to establish and maintain positive relationships with customers by providing clear and honest communication throughout the remodel

• Ability to identify experienced crew members you are hiring as subcontractors or as employees

• Knowledge of safety standards, permits, and licenses required to operate a safe workplace

What is the growth potential for a remodeling business?

Some individuals work on a part-time basis by themselves completing renovations for local homeowners.  However, with the right business model in place you can be responsible for finishing interiors of apartment buildings, entire subdivisions, and large commercial spaces. The quality of your work and responsiveness of service will build your reputation, helping to land larger contracts able to expand your small business into a major general contracting business.

What are some insider tips for jump starting a remodeling business?

You will need to network with other contractors and potential customers. Attend the next Home Show and rent a booth as an exhibitor to get your name out and about. Ask to leave your flyer and business contact at local hardware/DIY stores and reach out to local plumbers, electricians, and even general contractors who may need help on their next big job. Word of mouth is often responsible for finding your next customer, so you’ll need to work hard to build a positive reputation.

How and when to build a team

As soon as you cannot keep up with demand, start putting out feelers for qualified carpenters and installers.  Do not hesitate to complete background checks and ask for references from verifiable sources.

Part 2 - Is a Remodeling business the right fit for you?

Part 3 - Action plan to launch your Remodeling business in 90 days