Making the Jump from Specialty Contractor to General Contractor
The transition is perfectly doable if you know how.
Most general contractors started out as specialty contractors. “Some of the biggest companies in the world started out in a garage. Bechtel started off small and grew,” said Tom Aldrich, a counselor at the South Palm Beach chapter of SCORE Association, which provides free mentoring to entrepreneurs.
So if you’re looking to make the transition to GC, know that plenty of people before you have done it successfully. You can, too — with some guidance.
“Everyone wants to go from specialty contractor to general contractor, but they don’t know how to make the jump,” said Aldrich. A former civil engineer who spent many years as a construction manager for large projects, Aldrich shared his advice.
Write a business plan. Every company needs one. Outline where you want the company to go in three to five years and how you plan to get there. The Small Business Administration has templates and advice.
Figure out the financing. “You’re not going to get a business loan without a history,” said Aldrich. Get investors or take personal loans if you need to. A factoring house is an option — it will buy your debt and give you money upfront — but Aldrich called them legalized loan sharks. Maintain enough credit to pay your bills in 30 days. And know how much you’re making. “Once you get started and you have a cash flow, you don’t want to live on your cash flow because when things slow down, you’re going to wind up with no money.” Knowing what you’re really making will you decide which jobs you can afford to bid on.
Hire people who know what they’re doing and can help you. There’s no way to succeed without loyal, talented employees. Hire in the expertise you need — and then learn it yourself. Follow Aldrich’s advice for hiring the right people. Let it be known that you’re hiring, and steal a disgruntled employee away from someone else if you need to.
Get a GC license if your state requires one. You’ll need to take a course and pass an exam. Or hire someone who is licensed as GC. Of course you’ll also need various types of insurance.
Join associations like Associated General Contractors of America (AGC). “You can learn a lot,” said Aldrich. “They have courses on how to do things.”
Learn how to estimate and bid. “Most small contractors don’t know how to bid the job,” said Aldrich. He outlined some advice on estimating in this article on knowing your costs. For help with bidding on your first small jobs, turn to a GC you’ve worked with in the past. “As long as you’re not in direct competition with someone, they’ll pretty much help you,” said Aldrich. One of the toughest but most important aspects is learning to read specs and drawings closely enough that you don’t miss any costs.
Learn how to do takeoffs. If you’re a concrete contractor, you already know how to do takeoffs for concrete. As a GC you’ll need to do takeoffs for all materials. Basically, said Aldrich, “You take the specs and drawings, read the general and special conditions, and go through and make a list of everything you need to buy and everything you need to install or hire a sub to install.”
Find specialty contractors. Chances are you’ve been on projects that involved most of the specialties you’ll need. Reach out to contractors you’ve gotten to know and get prices.
Be conservative, and don’t bite off more than you can chew. Said Aldrich, “You don’t want to put yourself in heavy debt trying to buy a job. You need to be confident that you can handle the work and handle the payment terms. I’ve seen people who’ve taken a job and had to walk away from it because they were in over their head; they didn’t know what they were doing. That’s no good for you and no good for the client. It gives everybody a bad taste.”
Staff up adequately, and grow slowly. You can’t tie up all your resources on one job if you want to grow. You’ll need to have sufficient resources to do more than one job at a time. Grow gradually enough so you always have loyal employees you trust on every job.
Launching a new business is exciting — and risky. Start small, learn everything you can and get help when you need it. Construction is a booming business, so if you have what it takes and you’re willing to educate yourself, work hard and leverage the guidance available, the odds of success are in your favor.
Marianne Wait is an editor and writer who creates content for Fortune 500 brands.