Looking to start a contracting company

[Eric Lasley]

Im about to start a business venture with the guy that gc'd my first project.  It is my understanding that some cities in Texas require a GC to be registered with the city, but the state does not.  Am I correct?  

also, i would love some insight into the business and some good project mgmt software. 

[Aaron McGinnis]

A better place to ask this might be Contractor Talk or the JLC forums.

In general, construction is a nightmare and a spectacular way to lose your shirt. In specific, it is enormously rewarding, fascinating, and engaging. If you have zero experience, you're in for a rough and rocky time for the first few years - make sure you can go at least 6-8 months without any kind of real income. (That last part really applies to any new business venture)

Make sure you get a good understanding of the laws governing your area, and the big cities in your area. Locality makes a huge difference.

Do not trust any partners to do right by you, and make sure you are well protected by an operating agreement. The last person you'd expect to steal from you and screw you over will be the first person to do so. 

If you have no practical construction knowledge, you need to fix that before going into the business. I cannot stress this enough. Do not trust your GC friend/partner to do the right thing blindly - learn enough about construction materials and techniques to at least be able to ****-test him. You're opening yourself up to enormous damage otherwise. Seemingly simple construction matters can mean hundreds of thousands of dollars in liability. If nothing else, get on Youtube and watch some of the videos posted by builders. I recommend starting with Matt Risinger's channel - he's in your state and has some amazingly informative stuff.

Construction is an amazing vehicle for getting sued, and the dollar amounts are astounding. More than any other industry, it is a question of 'when' and not 'if' you get sued. You may get sued even if you do absolutely nothing wrong, and you need to be able to defend yourself. Decide now who owns the liability and spend some money to have a lawyer review your customer contracts. Make friends and network with a lawyer now so that when the lawsuit comes you have a resource to turn to in a moment when you will otherwise be panicking.

From day one, decide on a accounting system and pay a professional to set it up and at least do the month-end reconciliations and year-end taxes. Quickbooks is a good option because it is relatively cheap and pretty much universal. Be aware that Intuit is great at the add-on product. Payroll, taxes, and other things are bolt-on applications and they charge you subscription fees for it.

Do not trust any old accountant, get one that specializes in the field of construction and will use the NAHB chart of accounts. Failure to do so will leave you crying 2 or 3 years down the road when your books are an unrecognizable mess. Even a mid-sized construction business doing a few million dollars a year in business handles a mind-boggling number of transactions every month, to a boggling number of vendors... lack of professional help is a practically guaranteed way to ensure that your books WILL be an unrecognizable mess in a few years!

Get all insured up. Even if you are under 3 employees, go ahead and get a ghost worker compensation insurance policy and build your experience rating... do not get 2-3 years down the road, hire that third employee, and suddenly get faced with astronomical workers compensation insurance bills. Make sure you hire only insured subcontractors so you don't have to face a hard adjustment later on when it becomes a necessity.

Resist the urge to hire illegal labor. It's cheaper and easier that hiring legal labor, but it isn't worth the headache in the long run.

Download and read "The Elements of Building" by Mark Kerson, and everything about business that Jim Collins has ever written.

If you plan on working with the general public, or any third party construction, spend some money and start your advertising correctly. At the very least, invest in a good name, logo, and a half-decent looking website... then get started on Facebook and Instagram. This is so much easier starting out than it is a couple of years down the road.

What management software you use is going to be dependent on what you do. We are a design-build firm, and run Buildertrend... We've put more than a hundred jobs through the system, and I couldn't imagine being in business without it. Remember, any system you use is only going to be as good and effective as your use of it. As the programmers say - Garbage in, garbage out.

Edit to add: Make plans now to go to the International Build Show in January, 2018. It will cost you some money to get there and get in, but the resources and knowledge you'll gain will more than offset the cost.