What You Need to Know to Start Your Own Carpentry Business

What You Need to Know to Start Your Own Carpentry Business

August 2017
Share This Story

After you’ve spent years in the carpentry trade working for other people, you may be ready for the challenge of starting your own carpentry business. You’ve got the experience, the connections, the tools, and the training.

Are you ready?

The truth is, having the experience and know-how to get the job done is only half the battle when it comes to starting your own carpentry business. If you’re going to succeed on your own, you’re going to have to become experienced and knowledgeable at being a business owner, too. Here are a few questions to ask yourself if you think it’s time to take the leap from employee to employer.

What Are My Business Skills?

Performing the carpentry work is the easy part. Running the business can be something else entirely. Here are some of the things you’ll need to know (or learn) if you want to start a business.

Create a Business Plan

The first step to starting your own business is creating a business plan. The Small Business Association (SBA) calls your business plan your “roadmap to success.” It’s a critical element that can’t be overlooked.

Creating a business plan means spending time researching your industry, market, and competitors. It will require you to make financial projections and figure out pricing. You’ll need to estimate your business expenses and costs, and outline a marketing and sales strategy, too.

Get Guidance

When you go into business for yourself you should have a team of professionals to guide you. Find a good accountant and lawyer with experience in the construction industry in your market. Talk to your accountant about about markup, margin, profit, overhead, and tax liabilities. Talk to your attorney about contracts, change orders, proposals, invoices, and labor laws.

It can also be helpful to find a mentor who has transitioned from tradesman to business owner who will help you along the way. If you can find someone who is willing to give you advice and recommendations it can be tremendously helpful.

Structure and Register Your Business

Determine your business structure. An LLC will provide you with the limited liability protections of a corporation but will also be simpler come tax time. Ask your accountant and lawyer about the benefits of this over structuring your business as a sole proprietorship or partnership.

Pick a business name, and then check to see if your proposed business name is available before you start using it. You’ll also want to see if a web domain is available that matches your business name so you can market your business online (more on this later).

You’ll need to register your business if you are doing business in any name other than your own or if your business structure is a LLC, a partnership, or a corporation. Each state will have its own specific filing requirements for registering a business, so be sure you know exactly what your state expects from you.

Obtain Necessary Permits and Licenses

Each state has its own requirements for permits and licenses required if you want to run a business, and you may have additional local requirements, as well.

A carpentry contractor in Alameda, CA, for example, needs to have the following (or more) to do business:

  • Builders and construction permit
  • Business license filed with your city/ county
  • Land use permit/ zoning clearance
  • Fictitious business name - Doing Business As (DBA) statement
  • Authority to construct/ permit to operate
  • Air tanks permit to operate
  • Asbestos certification
  • Asbestos registration
  • Construction related permits
  • Contractor’s license
  • Corporation/ company filings
  • Employer’s registration form
  • Employer identification number (tax ID)
  • Sales and use permit
  • Proof of residency requirement

Understand Insurance Needs

Construction is a high-risk industry and as a business owner you’re responsible if things go wrong. You’re going to want to cover your assets with adequate insurance protection.

At the very least you’re going to need liability coverage to protect you from the high-price of a lawsuit if someone (not an employee) gets hurt as a result of your business. Or if someone’s property is damaged.

If you’re going to have employees, you’re also going to need workers compensation insurance. In most states workers comp is required by law, and you can get hit with some heavy fines or even criminal penalties for not carrying it.

You’re also going to want to protect your tools and equipment against theft, damage, or loss. Commercial property insurance generally covers your tools when they’re inside your place of business. Inland marine insurance can cover your tools and equipment when they’re mobile -- as you transport them back and forth between jobsites, for example.

Financial Matters

Many contractors starting their own carpentry business find estimating to be one of the biggest challenges. How long does it take you to complete a task? What’s your price for materials? How much is your overhead?

Do you know what your profit target is and how to calculate profit margins?

Another financial consideration comes down to cash flow, or your own personal savings. Before you set out on your own, you may want to set aside some capital to cover your business operating expenses and your personal expenses for 3-6 months.

Obtain Financing

If you don’t have cash on hand to get your business up and running, you may need to explore financing options. Before you ask a bank for a loan or line of credit, however, you’re going to need to have your financial data ready to go. Which is why it’s so important to spend the time to create a business plan, crunch the numbers, determine your pricing plan, and to know your profit margins.

Hire and Manage Employees

Being an employer requires a lot more work than being a self-employed contractor. If you plan on hiring employees, you’re going to want to be sure you’re doing it by the book.

Here are 7-steps to hiring an employee, according to the SBA:

  1. Obtain an employer ID number (EIN) from the IRS for reporting taxes.
  2. Prepare for and setup records for withholding federal and state taxes.
  3. Verify employment eligibility with I-9 forms.
  4. Register with your state’s new hire reporting program.
  5. Post required notices.
  6. File your taxes.
  7. Keep informed of state and federal labor laws and best practices.

How will you hire employees, motivate them, reward them, or discipline/ fire them if needed? Will you perform background checks and drug screening before hiring? Will you be able to manage payroll and be sure everyone is paid on time? Can you keep your cool when dealing with disappointing employees to avoid negative incidents or potential lawsuits?

You may find that it makes more sense for business to use sub-contractors rather than employees. In that case, you’re going to want to make sure you have clearly defined contracts and that you’re not misclassifying workers who are really employees as subcontractors.

Marketing and Sales

Marketing your business today requires more than just relying on word-of-mouth recommendations. If you’re going to start a business, you’re going to have to market it in a digital world. That means finding a domain name and setting up a website, claiming your social media profiles, and investing in paid advertising, like Google Adwords or Facebook ads.

You may have a knack for digital marketing and manage this area of your business yourself, or you may outsource this task to an agency or individual with SEO chops and online marketing experience. Either way, you need a digital presence. These day, before people commit to purchases they go online to validate their buying decision. If someone searches for your business online, you’ll want to be sure they can find you and that your online presence inspires trust in your capability to do the job.

Lastly, you’ll need to be able to close the deal when talking to prospective clients. You’re going to have to be a salesman, even if you’ve never done it before.

There’s a lot more involved with running a carpentry business than having talent and experience as a carpenter. Doing the work is the easy part. Starting and running a business is completely new set of skills that you’ll be required to master. If you’re ready to tackle the challenge of being a business owner, then now may be the perfect time for you to start your business.

Website Blueprint


We Save Our Clients an Average of 23% Per Year!  Get Quote