A Guide to Successfully Run Your Contractor Business

Many firms (small, medium or large scale ) today want a more flexible “just-in-time” workforce and prefer to hire contractors rather than full-time employees; hence the freelance market is rising. Whether you’re just starting or have been in the industry for a long time, growing your contractor firm involves careful preparation. You must take into consideration that you have the resources (people, equipment, etc.) to manage the additional work to strategically scale up your business.

Here are 10 Tips to run a successful contracting firm.

1.      Make a business plan.

Before you open your doors and start accepting clients as a contractor, you’ll need to figure out how your company will be legally structured—would you need to incorporate or will you be able to operate as a sole proprietorship?

A business plan assists a company—usually a startup—in defining its objectives and determining how to achieve them. From a marketing, financial, and operational aspect, a business plan lays forth a documented path for the company.

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A great business strategy, which is updated regularly, is a blueprint for success.

2.      Arrange for financing ahead of time

How much capital would you require for business premises, machinery, equipment, and other expenses? You will need to fund company and personal expenses in addition to capital finance until your business generates revenue. Even if you already have clients when you start your business, it could take months before you are paid for your first project.

If you need funding and plan to seek loans or cash from equity investors, you’ll need to provide a detailed overview of your financial needs in your business plan.

3.       Promote Your Company

Getting the first few paying customers is the most difficult part of beginning a new contractor firm. You may already have potential clients if you have switched from full-time employment in the same field. If you don’t have any friends, family, or business relations, you should reach out to them before opening your doors.

If you’re starting from the ground up, create a marketing plan and apply some easy, low-cost marketing methods (such as a social media strategy) to attract your initial customers.

4.      Be your accountant.

Learning to arrange your books to build processes for invoicing your clients, and basic accounting will help you save money on accounting expenses during the starting phase of your business.

Accounting software may make your bookkeeping tasks much easier. For around $10 per month, several of the new cloud-based accounting software products, such as FreshBooks and Zoho, offer ideal beginner packages for self-employed freelancers that include invoicing, expense tracking, easy reporting, and mobile apps.

5.      Hedge against all risk by taking a contractor Insurance

 Contractor Insurance provides complete and adequate contractor business protection against work loss or damage, as well as third-party claims or physical harm stemming from the execution of a civil engineering project.

This strategy is particularly beneficial to consulting engineers, architects, and financiers because it helps to lower overall construction costs while also providing effective financial protection for all parties involved.

6.       Having multiple clients can help you avoid potential tax issues.

The opportunity to deduct expenses from taxes is one of the most significant benefits of self-employment. Abuse of the practice, unfortunately, can result in tax officials scrutinising you. If you work solely for one company (even if you’re incorporated), you risk being classified as an employee by the IRS or a Personal Services Corporation by the CRA, preventing you from claiming the small business deduction and other regular business deductions. So, how to protect your contractor business then?

Having several clients is the easiest approach to ensure that you keep your status as an independent contractor. If you’re not sure whether you’re an independent contractor or not, talk to your accountant about it.

7.      Don’t try to be all things to all people.

Consider subcontracting some of your non-core activities if your business is growing and you’re finding that there aren’t enough hours in the day. Do you truly want to be your web designer or run your company’s social media accounts? Or do you want to deliver the merchandise to the clients yourself? Or do you want to plan your trip? Alternatively, keep your books and file your taxes.

Some of these ancillary chores can be outsourced to free up time for you to focus on your primary business activities. If you have family members who can help with some of these responsibilities, try taking their help.

8.      Adhere to the most up-to-date business practices.

When contractors aim to enhance efficiency and grow their business, one of the most common issues they face is agreeing on what is considered industry best practice. This isn’t the case, and it shouldn’t be. You can use any system you choose to handle anything from bookkeeping, scheduling, and invoicing to training and task management, as long as it provides basic task knowledge and assists with each employee by offering step-by-step instructions.

When you have a good system in place, you can not only sustain your present level of success, but you can also be ready to scale up when the time comes.

9.      Become a member of a trade association.

Associations like the Associated General Contractors are useful for more than just networking. They can also assist you in developing important business skills, such as determining how much to charge clients and how to construct a contract. They also suggest which items to utilise for certain types of jobs and where to find sub-trades.

10.  Before you expand, be sure you’re ready. 

Many successful contracting businesses reach a point when they need to hire more personnel to meet the increasing workload. A self-employed IT contractor, for example, may have to choose between bidding on a contract that requires a multi-person team to execute or passing on the chance.

Many contractors find themselves in this middle ground, where they are obliged to hire additional workers because they can’t handle the demand, yet their revenues aren’t increasing. It’s more convenient for many contractors to stay small. This ensures that they have a positive cash flow because their expenses are kept to a minimum.

If, on the other hand, your objective is to grow a larger company and you have the time and energy to devote to expansion, then go for it.