How to start a remodeling business: from plans to profit

Starting a remodeling business is a rewarding venture that combines craftsmanship and design skills with business savvy. The industry is worth hundreds of billions of dollars, with steady demand for projects ranging from residential kitchen upgrades to full commercial renovations.

This guide will walk you through the practical steps, from validating your business concept and securing funding to obtaining necessary licenses and building supplier relationships, to help you launch a successful remodeling business in the U.S.

Step 1: Plan your business and validate your idea

Research your market

Start by researching your local area. Visit home improvement stores on a Saturday morning to see what materials people buy. Talk to real estate agents about what home features buyers currently want. This direct feedback is more valuable than generic national reports.

You can also review public records for building permits in your city or county. This data shows you exactly what types of remodeling projects are most common, from bathroom additions to deck constructions, giving you a clear picture of local demand.

Analyze your competition

Use Google Maps to identify all the remodeling contractors within a 20-mile radius. Read their customer reviews carefully to spot their strengths and weaknesses. A common mistake is to compete on price alone. Instead, find a service gap you can fill, like better communication or a specific design style.

Estimate your startup costs

A clear financial picture is your foundation. While costs vary, you can create a realistic budget with these typical ranges. Remember to account for operating capital to cover expenses for the first 3-6 months before client payments become consistent.

• Tools and Equipment: $5,000 - $15,000
• Work Vehicle (Used Van or Truck): $10,000 - $25,000
• Licenses, Permits, and Insurance: $1,500 - $5,000
• Initial Marketing (Website, Business Cards): $1,000 - $3,000

Here are 4 immediate steps to take:

• Identify the top three remodeling services in demand in your area.
• List five local competitors and note one thing you could do better.
• Create a detailed startup budget based on the cost categories above.
• Draft a one-page summary of your business concept and ideal customer.

Step 2: Establish your legal structure and get licensed

Choose a Limited Liability Company (LLC) for your business structure. It protects your personal assets, like your home and car, if the business faces a lawsuit. An LLC also offers pass-through taxation, which means profits are taxed on your personal return, avoiding double taxation.

Next, get an Employer Identification Number (EIN) from the IRS website. It is free and you will need it to open a business bank account, apply for licenses, and hire employees. Think of it as a Social Security number for your company.

Navigate licenses and permits

Licensing rules change by state and city. Most states require a general contractor license, managed by a state licensing board. This process often involves an exam, proof of experience, and a background check. Some contractors try to work without a license, a mistake that leads to heavy fines.

For each job, you will need specific project permits. These can include building, electrical, or plumbing permits from your local municipal office. Costs range from $100 to over $2,000, and approval can take a few days or several weeks, so plan ahead.

Here are 4 immediate steps to take:

• Register your business as an LLC with your Secretary of State.
• Apply for a free EIN directly on the IRS website.
• Visit your state’s contractor licensing board website to review requirements.
• Research your city’s building department for a schedule of permit fees.

Step 3: Secure insurance and manage risk

Protecting your business from day one is critical. A single accident could derail your company. You will need a few key policies to cover your operations.

• General Liability: Covers property damage or injuries to third parties. If a client’s floor gets damaged, this is your protection.
• Workers’ Compensation: Required in most states if you have employees. It covers medical costs and lost wages if a team member gets hurt.
• Commercial Auto: Your personal auto policy will not cover your work truck.

For general liability, a $1 million policy is the minimum, but $2 million is safer. Annual premiums for a small remodeling business typically range from $1,200 to $4,000. Some contractors try to save money with lower coverage, a move that can be financially devastating after one major claim.

You should get quotes from insurers who specialize in construction, such as The Hartford, Hiscox, or Next Insurance. A general agent might not understand the specific risks of remodeling, like accidental damage to a client’s plumbing or electrical systems.

Also, consider professional liability insurance if you offer design services. This covers claims of errors or omissions in your plans. If you have a workshop or store expensive equipment, commercial property insurance protects your assets from theft or damage.

Here are 4 immediate steps to take:

• Request quotes from at least three insurance providers that specialize in construction.
• Confirm your state’s workers’ compensation requirements.
• Decide between a $1 million or $2 million general liability policy.
• List all tools and equipment to see if you need commercial property insurance.

Step 4: Set up your workspace and buy equipment

Find your operational base

You can start from a home garage, but a dedicated workshop of 500-1,000 square feet provides better organization. Before you sign a lease, check with your city’s planning department for zoning. You will likely need a space classified for light industrial or commercial use.

Some contractors make the mistake of signing a long lease too soon. You might want to negotiate a shorter initial term, like one or two years. Also, ask about a tenant improvement allowance to help pay for any necessary modifications to the space.

Acquire your core equipment

Your equipment is a major investment, but you do not need everything new. High-quality used gear from auctions or classifieds can cut your initial costs by 30-50%. Focus on foundational items first. You can always add more specialized equipment as you grow.

• Miter Saw: $400 - $800
• Portable Table Saw: $500 - $1,000
• Drill and Impact Driver Kit: $200 - $500
• Ladders and Scaffolding: $300 - $700

Build supplier relationships

With your space and equipment ready, you need materials. Open trade accounts at local lumberyards and specialty suppliers like Ferguson (plumbing) or City Electric Supply. These accounts often provide better pricing and credit terms than big-box stores. Most do not require minimum orders.

Here are 4 immediate steps to take:

• Research commercial spaces between 500-1,000 square feet in your target area.
• Create a budget for your core equipment, comparing new versus used prices.
• Contact your local planning department to confirm zoning for a workshop.
• Identify two local suppliers and ask about opening a trade account.

Step 5: Set up your payment processing

Establish your payment structure

A standard payment schedule is 30% upfront, 40% at a key milestone like drywall completion, and the final 30% upon project sign-off. Always outline these terms clearly in your client contract to avoid confusion. This protects both you and your client.

While some clients still pay by check, many expect to use credit cards or digital wallets. Offering modern payment options makes you look more professional and makes it easier for clients to pay you promptly. A frequent misstep is relying only on checks, which can delay cash flow.

Choose a payment solution

You need a payment solution that works on the job site. Look for low transaction fees and no monthly charges or required hardware. Many providers charge nearly 3% plus a fixed fee per transaction, which can add up quickly on large project payments.

For remodeling businesses that need to accept payments on-site, JIM offers a streamlined solution. With JIM, you can accept debit, credit, and digital wallets directly through your smartphone. Just tap and the payment is done.

At just 1.99% per transaction with no hidden costs or extra hardware, it is particularly useful for collecting deposits on the spot or final payments after a walkthrough. This simple rate is a clear advantage.

Here is how to use it:

• Get Started: Download the JIM app for iOS.
• Make a Sale: Type the sales amount, hit sell, and ask your customer to tap their card or device on your phone.
• Access Funds: Your money is available right on your JIM card as soon as the sale is done. There is no wait for bank transfers.

Here are 4 immediate steps to take:

• Draft your standard payment schedule to include in all client contracts.
• Compare the total fees for a $1,000 payment between JIM and another provider.
• Download the JIM app to explore its interface before your first client meeting.
• Update your contract template to list all accepted payment methods.

Step 6: Fund your business and manage finances

Secure your startup funding

The Small Business Administration (SBA) is a great starting point. An SBA 7(a) loan can provide $50,000 to $350,000 for a new business. You will generally need a credit score of 680+ and a solid business plan. Interest rates are typically the prime rate plus 2-5%.

For smaller needs, an SBA Microloan offers up to $50,000. You could also look into equipment financing specifically for your truck and tools. These loans use the equipment as collateral, which can make them easier to secure than a general business loan.

Set up your financial systems

With funding in mind, your next focus is daily money management. Calculate your total monthly expenses, including insurance, vehicle payments, and rent. Aim to have 3-6 months of this amount saved as working capital. This cash reserve covers you before client payments become regular.

A frequent misstep is mixing personal and business money. Open a separate business checking account immediately. This simplifies bookkeeping for tax season and reinforces the legal protection your LLC provides. It is a simple step that prevents major accounting problems down the road.

Here are 4 immediate steps to take:

• Check your personal credit score with a service like Experian or Credit Karma.
• Explore loan options on the official SBA.gov website.
• Calculate your estimated operating expenses for one month to project your working capital needs.
• Open a dedicated business checking account at your local bank or credit union.

Step 7: Hire your team and set up operations

Build and train your crew

Your first hire will likely be a Lead Carpenter to run job sites, with a typical salary of $50,000 to $75,000. You can also add a Carpenter’s Helper at $18 to $25 per hour. A good revenue target to keep in mind is $150,000 to $250,000 per field employee.

Once you hire, focus on compliance. Ensure your team completes the OSHA 10-hour safety course. If you work on homes built before 1978, the EPA requires Lead-Safe Renovator (RRP) certification. A mistake some owners make is misclassifying employees as 1099 contractors, which can lead to serious IRS penalties.

Manage projects and subcontractors

To keep jobs on track, you might want to use project management software. Platforms like Buildertrend, CoConstruct, or Jobber handle scheduling, client communication, and financials. They centralize information and reduce errors that can hurt your profit margins.

Speaking of your team, you will likely work with subcontractors. Before they step on-site, always get a Certificate of Insurance (COI) to verify their general liability and workers' comp. Call the insurance provider to confirm the policy is active. Skipping this step leaves you exposed if they cause damage or someone gets hurt.

Here are 4 immediate steps to take:

• Draft a job description for a Lead Carpenter, including salary range.
• Research local OSHA 10 and EPA RRP certification courses.
• Request a demo from a project management software like Buildertrend.
• Create a checklist to onboard subcontractors that includes insurance verification.

Step 8: Market your business and find clients

Your first marketing tool is your job site. A professional sign with your company name, phone number, and website can generate high-quality local leads. Also, invest in a simple portfolio website that showcases your work with high-quality photos.

Build your online presence

Set up a free Google Business Profile immediately. Fill it out completely with your service area and photos. Encourage every happy client to leave a review. Positive reviews are one of the strongest signals for new customers looking for a trustworthy contractor.

Many new owners spread their marketing budget too thin. You might want to focus on one or two channels first. For example, a Facebook or Instagram page with before-and-after photos can build a following and attract clients visually without a large ad spend.

Leverage professional networks

Some of your best leads will come from referrals. Introduce yourself to local real estate agents, interior designers, and architects. These professionals frequently need reliable contractors for their clients. A single strong relationship can provide a steady stream of projects.

In addition, your material suppliers often have a list of contractors they recommend to homeowners. Ask them how you can get on that list. This costs you nothing but can be a great source for new business.

Here are 4 immediate steps to take:

• Set up and verify your Google Business Profile with service details.
• Order professional job site signs with your name, number, and website.
• Take high-quality before-and-after photos of your very first project.
• Identify three local real estate agents or designers to connect with.

Step 9: Develop your pricing strategy

Choose your pricing model

Most remodelers use either a fixed-price or a cost-plus model. A fixed-price contract gives the client one total cost for the project. It is simple for them but carries risk for you if your expenses unexpectedly increase.

The alternative is a cost-plus model. You bill the client for actual labor and material costs, plus a set percentage for your overhead and profit. This model protects your margin but requires transparent bookkeeping to maintain client trust.

Set your markup and profit

Your markup should range from 25% to 50% over your direct job costs. For example, if a project’s labor and materials cost you $20,000, a 40% markup results in a client price of $28,000. This covers your overhead and profit.

Many new owners underbid just to win jobs. A markup below 25% often means you are working for free after you pay for insurance, vehicle costs, and other overhead. Your goal should be a net profit margin of 10% to 15% on every job.

To check your pricing against the market, you can call a few local competitors. Ask for a quote on a small, standard job, like hanging a new interior door. This gives you a real-world baseline for your area without revealing you are a competitor.

Here are 4 immediate steps to take:

• Decide if you will start with a fixed-price or cost-plus model.
• Calculate your minimum markup needed to cover all business overhead.
• Create a sample estimate for a small bathroom remodel using a 40% markup.
• Research local rates by getting a quote for a single, defined task.

Step 10: Maintain quality and scale your operations

Establish your quality standards

Create a final walkthrough checklist with at least 10 specific items, from paint finish to hardware installation. This becomes your internal standard. For formal credentials, you could pursue a certification from the National Association of the Remodeling Industry (NARI) once you have a few years of experience.

To measure quality, track your callback rate. Your goal should be zero callbacks for warranty work within the first year of project completion. Also, send a simple post-project survey to clients and aim for a satisfaction score of 9 out of 10 or higher.

Know when to grow

A good benchmark for hiring another field employee is when your revenue consistently exceeds $250,000 per person. Some owners make the mistake of hiring too soon, which hurts profitability. Wait until your current team is at maximum capacity.

When you find yourself spending over 50% of your week on sales and admin instead of overseeing jobs, it is time to hire a project manager or office help. Software like CoConstruct or Buildertrend can also help you manage the increased complexity that comes with growth.

Here are 4 immediate steps to take:

• Draft a 10-point quality checklist for your final project walkthroughs.
• Create a simple client satisfaction survey to send after each job.
• Calculate your current revenue per field employee to assess capacity.
• Review the features of a platform like CoConstruct for future growth needs.

Starting a remodeling business is about more than just skill. Your reputation for clear communication and reliability will be your greatest asset. Build trust on every job, and the projects will follow. You have the blueprint, now go build your business.

As you get started, make payments simple. JIM turns your phone into a card reader, so you can accept payments on-site for a flat 1.99% fee with no extra hardware. This keeps your cash flow steady from day one. Download JIM.