Start Your Contracting Business

A construction business plan for a one-person start fits on one page. It answers what work you’ll do and won’t, for whom, where, how many hours you can actually bill, what each hour has to earn, and how you’ll find work, get paid and keep records. This lesson walks you through each line, with an example you can copy.

This is general information to help you plan, not legal or tax advice. Where a line touches contracts, deposits or taxes, check it with an attorney or an accountant.

On a crew, someone else found the work, priced it, collected the money, kept the records and organized the jobs. When you work for yourself, those five jobs are yours on top of the trade work, and nobody pays you for them directly. Your plan needs a line for each:

1. Finding work
2. Pricing
3. Getting paid
4. Keeping records
5. Organizing the work

Before those, three decisions shape every answer: what you’ll do, for whom, and where.

Use the work you’ve already done. List your last ten jobs and answer four questions for each:

Four yeses: it goes on your included list. Any no: it goes on your not doing yet list, with what would have to change (a tool, a helper, a license). Keep the included list short enough to describe in one sentence.

Pick one type of customer to start with: homeowners, landlords, property managers, general contractors who hire subs, or businesses. Answer these questions about that customer before you decide:

If you can’t answer a question yet, ask two or three people who already work for that customer type.

List the towns or counties you’ll work in, and price the drive before you add a place to the list. Drive time is time you can’t bill:

Example: the cost of a far-away town
45 minutes each way × 2 = 1.5 hours a day you can’t spend on the job. On a 5-day job that’s 7.5 fewer billable hours.
At the $73 an hour from the capacity example below, that’s 7.5 × $73 = about $550 of billable time lost, plus fuel.
Either build it into quotes for that town, or leave the town off the list for now.

Every town on the list is also a place whose rules you’ll check: local business licenses and building permits can differ from one city or county to the next. The setup roadmap shows where to look them up.

Capacity is how many hours you can actually charge for. It’s the number your prices are built on.

Your numbers:

• Job days a week: ____ × hours on the job per day: ____ = billable hours a week: ____
• Working weeks a year: ____ × billable hours a week = billable hours a year: ____
• What the business needs in a year (your pay before taxes, plus overhead like insurance, vehicle, phone and software, plus a profit): $____
• That amount ÷ billable hours a year = what every billable hour has to bring in: $____

Example: a one-person painter
4 job days a week × 7 hours on the job = 28 billable hours a week.
44 working weeks (after holidays, sick days and slow weeks) × 28 = 1,232 billable hours a year.
The business needs $90,000 a year for pay before taxes, overhead and profit: $90,000 ÷ 1,232 = about $73 per billable hour.
Materials are on top of that: bill them separately, with your markup. These numbers are an example; use your own.

Two traps in this math:

• Counting 40 hours a week. Quoting, driving, buying materials and paperwork aren’t billable. Count only the hours on the job.
• Counting 52 weeks. Holidays, sick days, weather and gaps between jobs all come out of the year. If you’re unsure, count fewer weeks; the hourly target goes up, and you’ll know why.

That hourly target is your labor price: it already includes your pay, overhead and profit, so don’t mark it up again. Mark up materials only; markup vs. margin shows how.

Now one line for each of the owner’s jobs, plus your key partners. These are starting rules, not the only way to do it.

A painter leaving a larger company to work alone. This illustrates the format; your answers will differ.

Usually, yes, for a one-person start. The SBA describes two formats: lean startup plans “can take as little as one hour to make and are typically only one page,” while traditional plans “can be dozens of pages long.” The SBA also notes about the traditional format: “Lenders and investors commonly request this plan.” If you’re applying for a loan or bringing in an investor, ask them what they need.

The one-page plan above borrows from the SBA’s lean format: what you offer, to whom, how you’ll reach them, who you’ll work with, and the numbers.

This week:

1. Finish the sentence “I help [customer] with [service] in [area].”
2. Run your last ten jobs through the four questions to get your included and not-doing-yet lists.
3. Fill in the capacity lines and get your own hourly target.
4. Write one line for each of the owner’s jobs, plus your key partners.

Then check what your setup requires in your area with the setup roadmap, and turn the plan into numbers with the startup budget guide.

Your services and what you won’t do, your customer, your service area, your billable hours and hourly target, and how you’ll find work, price, get paid and keep records. A lender may also ask for financial projections.

Add up what the business needs in a year (your pay before taxes, overhead and a profit) and divide it by the hours you can actually bill, not by 40 hours a week. Bill materials separately. Then check it against your market: ask two or three contractors or suppliers in your area what similar work goes for, and compare with any competitor quotes your customers show you.

No. Offer the work that passes all four questions above: you can do it alone, you own the tools, it’s within your skills and license, and you’d take it again. Add the rest as those answers change.

If you’re working out how to start a construction business, here’s the short version: decide what work you’ll offer and where, choose a business structure, register the business and its name, get the tax ID numbers you need, check the licenses and permits for your trade and location, open a business bank account and get insured. Then you set up how you’ll price jobs and find your first customers.

The details vary with your trade and your location, so the same checklist leads to different answers for a painter in one state and an electrician in another. This guide gives you the order, the questions to ask, and the official places to get the answers.

This guide is an introduction to what you need to set up and what to pay attention to. It isn’t legal, tax or insurance advice. Before you act on any step, check it with the agencies linked below and talk to the right professional: an accountant, an attorney, the office that licenses your trade, or a licensed insurance agent.

Here’s the whole roadmap on one page. The sections below walk through each step.

The SBA’s Launch your business guide covers most of the same ground for any small business. The steps below add what contractors need on top.

Before any paperwork, write down what the business actually does. Every later step depends on it: the license you need depends on the work, the insurance on the risk, and the tax setup on whether you’ll hire.

Answer three questions:

• What work will you do, and what won’t you do? “Interior repainting in occupied homes” is a business. “Painting and anything else that comes up” is too broad to price, insure or license.
• Who is the customer? Homeowners, property managers, general contractors you’d work for as a sub.
• Where will you work? The cities and counties you’ll serve. They decide which local rules apply.

Then finish this sentence: “I help [customer] with [service] in [area].” Keep it. You’ll use it when you talk to the licensing board, the insurance agent and the accountant.

Your business structure is the legal form of the business. According to the SBA, it affects how much you pay in taxes, your ability to raise money, the paperwork you need to file, and your personal liability.

If you’re starting alone, two structures to compare first are a sole proprietorship and an LLC:

Partnerships and corporations are the other common options. The SBA page compares all of them.

There is no one right answer for every contractor. The right structure depends on your state, your income, whether you’ll hire, and how much personal risk you’re carrying. That’s a decision to make with an accountant or an attorney. The SBA itself says consulting business counselors, attorneys and accountants can prove helpful.

Example: questions a one-person crew takes to the accountant
A painter who works alone writes these down before the meeting:

• Do I expect to hire anyone in the next year?
• Roughly what do I expect to earn in year one?
• Which of my personal assets would I want protected if a job goes wrong?
• What does my state charge to form and keep an LLC each year?
• How would each structure be taxed for someone in my situation?
• Can I start one way and change later, and what would that involve?

Whether you have to register depends on the structure and the name:

• Working under your own legal name: the SBA says that if you conduct business as yourself using your legal name, you won’t need to register anywhere.
• Using a business name (a DBA, “doing business as”): most states require you to register it.
• Forming an LLC or a corporation: you register it with the state. Most states handle this through the Secretary of State’s office or a state business agency.

Before you settle on a name, check that it isn’t already taken in your state’s business registry.

Registering a business is not the same as being allowed to do the work. Registration creates the business; a contractor or trade license, if your work needs one, is a separate permission from a separate agency. Step 5 covers that.

The EIN (Employer Identification Number) is your business’s federal tax ID. The SBA lists when a business needs one, including when it:

• pays employees
• operates as a corporation or partnership
• files certain employment or excise tax returns

A sole proprietor with no employees isn’t on that list. The SBA still recommends applying for an EIN right after you register your business, and says it’s free. Ask your accountant what makes sense for you.

If you apply, apply directly with the IRS. The IRS says you never have to pay a fee for an EIN, and it warns about websites that charge for one.

State tax numbers are separate. The SBA says the need for one ties directly to whether your business must pay state taxes, and the process varies by state. Your state’s tax agency or department of revenue will tell you what applies to your work. The IRS’s starting a business page covers the federal side and points you to your state for the rest.

This step depends most on your trade and location. The SBA says requirements and fees vary based on your business activities, location and government rules, and it lists construction and plumbing among the activities commonly regulated at the local level.

Keep four things apart, because different offices handle them:

1. Business registration - the state record that the business exists (step 3).
2. A contractor or trade license - permission to do certain kinds of work. Check with your state’s contractor licensing board if your state has one for your trade, and ask about your specific trade and the size of jobs you’ll take.
3. A local business license - some cities and counties require one to operate there.
4. Job permits - permission for a specific project, usually from the city or county where the job is. Ask the local building department.

A checklist, this one included, can’t tell you that you’re allowed to do the work. Only the issuing office can. Write down who you spoke to and when.

Keep business money out of your personal account from the first job. The SBA says to open one as soon as you start accepting or spending money as your business.

Banks usually ask for your EIN (or your Social Security number if you’re a sole proprietor), your formation documents if you formed an LLC or corporation, any ownership agreements, and your business license. Ask your bank what it needs for your structure before you go in. Separating business and personal finances covers the account and the routines that keep it working.

The SBA describes general liability insurance, which covers claims of injury to other people and damage to their property, as a common type for any business. It also says the federal government requires every business with employees to have workers’ compensation, unemployment and disability insurance, and that laws requiring insurance vary by state.

Which policies you need and how much coverage is right depend on your trade, your state and the work you take. Take your “I help [customer] with [service] in [area]” sentence to a licensed insurance agent. If your trade is licensed in your state, ask the licensing board whether the license requires insurance or a bond.

Before the first estimate goes out, decide how you’ll get from costs to a price. Two guides to start with:

• Markup vs. margin - how to price a job so it covers your overhead and your own pay, with a worked example for a one-person job.
• How to build a construction estimate - what every estimate needs: scope, exclusions, assumptions, payment terms and a place to sign.

Write down where the first five or ten jobs will come from: people you’ve worked for before, general contractors who know your work, referrals, a basic online presence. Local SEO for contractors covers how to show up when people near you search for your service.

The setup is a list of questions with answers in different offices, so keep the questions in one place. One row per requirement:

The rows above are an example of how to fill it in, not a list of what your business needs. Leave “not sure” as “not sure” until an official source answers it. A row marked done on a guess is the one that causes trouble later.

Start your setup research list today. Write your one-sentence business definition at the top, add a row for each of steps 2 to 7, and find the official link for each one in your state, city and county. Then book two conversations: one with an accountant about structure and taxes, and one with your state’s contractor licensing board (or the office that licenses your trade) about your work.

It depends on your state, your trade, and the size and type of jobs you take. Some work needs a state contractor or trade license, some places require a local business license, and projects may need permits from the city or county. Check with the office that licenses your trade in your state and with the city or county where you’ll work.

There’s no answer that fits everyone. According to the SBA, a sole proprietor can be held personally liable for the business’s debts, while an LLC protects you from personal liability in most instances, but an LLC also means state filings and fees. Bring your situation to an accountant or attorney before you choose.

Not always. The SBA lists the cases that require one, such as having employees or operating as a corporation or partnership. If you do apply, it’s free from the IRS, so never pay a website to get one for you. Your accountant can tell you whether you need one.

It depends on your trade, your state and the tools you already own. Make a list of one-time costs (registration and licensing fees, tools, a vehicle) and monthly costs (insurance, phone, software, fuel), and get real quotes for each instead of guessing.

Define the business first, because every other answer depends on it. Then choose the structure and register, because the bank will ask for both, and the licensing board and insurance agent will want to know what kind of business you are. Licenses, the bank account and insurance come next, before you take paid work.

Contractor license requirements depend on your state, your trade, the size of your jobs and the city or county where the work is. No single list can tell you what applies to you. What this lesson gives you is the map: the six kinds of permission and protection a contractor deals with, who issues each one, and the exact questions to ask each office so you can find your own answers.

This is general information, not legal or insurance advice. Only the issuing office can tell you what you need. Confirm every requirement with your state’s licensing board, your city or county, and a licensed insurance agent.

Registration doesn’t let you do the work, a license doesn’t cover a specific project, and insurance isn’t a bond. Treat each row as its own item to check. The setup roadmap covers registration and the other setup steps.

The SBA says requirements and fees vary based on your business activities, location and government rules, and lists construction and plumbing among the activities commonly regulated at the local level. It adds: “Local governments determine registration, licensing, and permitting requirements.” So work from the state down to the job:

1. Your state’s contractor licensing board. Search “[your state] contractor license board” and use the site that ends in .gov. Check whether your trade is licensed by a separate board, and search under your trade’s name too.
2. Your state’s business registration office, for the business itself.
3. Each city and county on your service list, for local business licenses.
4. The building department in each of those places, for project permits.
5. A licensed insurance agent, for coverage, and a surety company or agent, if a bond is required.

Call or email, and write down who answered and when:

• Does the work I plan to do need a state license? Under which classification?
• Is there a job-size limit, in dollars or scope, below which no license is needed?
• What do I need to apply: an exam, proof of experience, a business registration?
• Does the license require a bond? How much, and who can claim on it?
• Do you require proof of insurance? Which kinds and how much?
• Can I bid, advertise or sign contracts before the license is issued?
• Do I need my own license to work as a sub under a licensed contractor?
• How long does approval usually take, and what does it cost?
• How often do I renew, and is there continuing education?
• If I hire someone, do they need their own license or registration, and does my bond or insurance requirement change?

For every place on your service list:

• Do I need a local business license to work here, even if my business is based elsewhere?
• Do contractors have to register with the building department before pulling permits?
• Which of the jobs I do need a permit? Is there a size limit below which they don’t?
• What does a permit for a typical job of mine cost, and how long from application to approval?
• How many inspections does that kind of job need, and how far ahead do I book them?
• On a homeowner’s job, who pulls the permit? Can a permit pulled by the owner cover work I’m paid to do? Ask the building department before you agree to it.

Insurance doesn’t come from a board. It comes from an insurer, and what you need depends on your trade and your contracts. The SBA lists general liability insurance, which covers financial loss from bodily injury and property damage, as a common type for any business. It also says the federal government requires every business with employees to have workers’ compensation, unemployment and disability insurance, and that laws requiring insurance vary by state. Its advice for buying: assess your risks, find a reputable licensed agent, and shop around. Its list of six common types is a useful starting point for the conversation: general liability, product liability, professional liability, commercial property, home-based business insurance, and a business owner’s policy that bundles common coverage.

Take the one-sentence description from your business plan to the agent and ask:

• Which of the SBA’s six types, plus commercial auto and tool coverage, does a business like mine need, and why each one?
• What limits do the customers and general contractors I’ll work for typically ask for?
• Can you add a customer as an additional insured when a contract asks for it, and what does that cost?
• Do I need workers’ compensation on myself if I have no employees?
• Does my policy cover my tools and my vehicle while I’m working, or do I need separate coverage?
• What does the policy exclude for my trade?
• If I hire someone, even part-time, what do I need to add?
• When a customer asks for proof of insurance, how quickly can you send a certificate?

Get quotes from more than one agent, and compare what each policy covers, not only the price.

A bond is a guarantee, issued by a surety company, for the benefit of someone else, such as your customer. It doesn’t protect your business the way insurance does. Before you buy one, ask the surety agent: if you pay a claim on my bond, do I have to pay you back? Contractors run into two kinds:

License bonds. Some states require one to get or keep a contractor license. California is one example: its licensing board says “the bond must be in the amount of $25,000” and that it is filed for the benefit of consumers who may be damaged as a result of defective construction. The board’s bond basics page adds that homeowners can file claims against it, and so can employees damaged by a contractor’s failure to pay wages. Your state’s amount and rules may be different, or there may be no license bond at all; the licensing board will tell you.

Contract bonds. Some jobs require a bond as part of the contract. The SBA says many public and private contracts require surety bonds, and describes the main types:

If a contract asks for one, ask a surety agent what it takes to qualify before you bid.

A remodeler starting out checks two levels. This shows the method, not the rules in any state.

Once, for the business:

For each project, before the estimate goes out:

The project checks go into the estimate, so the price and the schedule already include them.

Write every answer down, with the date and the cost. One row per requirement:

The cost column goes straight into your startup budget.

Leave the answer blank until an official source gives it. A checklist, this one included, can’t tell you that you’re allowed to do the work; only the issuing office can.

This week:

1. Find your state’s licensing board on its .gov site, and the licensing pages of every city and county on your service list.
2. Copy the questions above into your requirements record and send them.
3. Ask at least two insurance agents for quotes, with the agent questions above.
4. Mark every requirement you haven’t confirmed as open, and give each one a date to follow up.
5. Add every fee, premium and bond cost to your startup budget.

It depends on your state, your trade and the size of the jobs you take, and some cities and counties have their own rules. Ask your state’s licensing board, using the questions above, and check each city and county where you’ll work.

A guarantee, issued by a surety company, that some states require as a condition of a contractor license. In California, for example, the licensing board requires a $25,000 bond filed for the benefit of consumers, and homeowners and unpaid employees can file claims against it. Your licensing board will tell you whether your state requires one and how much.

No. A license bond is filed for the benefit of your customers (in California, also your workers). Insurance protects your business against covered losses and claims. You may need both. Ask your insurance agent and a surety agent to explain how they apply to you.

Not by itself. A business registration or local business license lets the business exist or operate in a place. Permission to do the trade work, where it’s required, is a separate license, and each project may still need a permit.

Separating business and personal finances means the business has its own bank account, its own card and its own records, and every dollar that moves between you and the business is written down as what it is. Set it up before the first job and tax time is sorting, not guessing. This lesson gives you the setup in five steps and a weekly routine that keeps it working.

This is general information about organizing your money, not tax or accounting advice. How your business and your pay are taxed depends on your structure and your situation. Take the questions at the end of this lesson to an accountant.

The SBA puts it plainly: “You’ll need a business bank account no matter what kinds of payment you choose.” Its launch guide says to open one as soon as you start accepting or spending money as your business.

Before you pick a bank, ask these questions:

Use the business card for business purchases only, and your personal card for personal purchases only. If you slip, which happens, fix it the same week:

• Business purchase on a personal card: keep the receipt and pay yourself back from the business account the same week. Write “reimbursement” and the receipt’s date on the transfer.
• Personal purchase on the business card: pay the business back from your personal account the same week.

Ask your accountant how they want these recorded in your books, so it’s done the same way every time.

The rule isn’t about being neat. Every mixed transaction is one you’ll have to explain later.

The IRS says you may choose any recordkeeping system suited to your business that clearly shows your income and expenses. It lists the supporting documents to keep, including records of gross receipts, purchases, expenses, travel and transportation, assets and employment taxes. For expenses, its examples include proof of payment, cash register receipts, account statements, credit card receipts and statements, and invoices.

A routine that works in a truck:

1. Photograph every receipt the day you pay it, before it fades or blows away.
2. Write the job name on it, or in the photo’s note, if the cost belongs to a job.
3. Keep the photos in one place: one folder, one app, not your camera roll.
4. Keep invoices you send in the same system, numbered in order.
5. Tag each receipt with a category. A starter list: materials, tools and equipment, vehicle and fuel, insurance, licenses and permits, subcontractors, phone and software, marketing. Your accountant may want different categories; agree on them once.
6. Keep a mileage log if you use one vehicle for work and personal driving: date, start and end point or miles, and the business purpose of each trip. The IRS lists travel and transportation expenses among the records to keep; ask your accountant how your vehicle use will be handled.

How long to keep them: the IRS’s general rule is 3 years, with longer periods in some situations. Two matter for contractors: employment tax records for at least 4 years after the tax is due or paid, whichever is later, once you have employees; and for property such as a truck, tools and equipment, the IRS says to generally “keep records relating to property until the period of limitations expires for the year in which you dispose of the property.” In practice: keep equipment receipts for as long as you own the equipment, and then some. Ask your accountant which periods apply to you.

Two kinds of money move between you and your business, and neither is a sale or a normal expense:

• Money you put in (often called an owner contribution): for example, your savings moved into the business account to buy equipment.
• Money you take out: what you move to your personal account to live on. Depending on your structure it may be an owner’s draw or a salary through payroll.

Record each one as what it is, with the date and amount. How they’re treated for tax depends on your business structure, so ask your accountant how to record them in your setup.

Example: a cleaning business buys equipment with the owner’s savings
The owner moves $1,200 of savings into the business account, and the business buys a commercial vacuum and supplies for $1,200.
That’s two records, not one: owner contribution $1,200 and equipment and supplies purchase $1,200.
If it’s recorded as one purchase with no contribution, the books show money that came from nowhere.
The numbers are an example. The startup budget guide shows how to plan purchases like this before you make them.

Three habits that keep this simple:

• Pay yourself on a schedule, for example a fixed amount every two weeks, instead of taking money whenever the account looks full. Your accountant can tell you how this works for your structure.
• Set aside money for taxes before you pay yourself, in a separate savings account. The IRS says individuals, including sole proprietors, partners and S corporation shareholders, generally have to make estimated tax payments if they expect to owe tax of $1,000 or more when their return is filed, and that estimated tax covers self-employment tax too. Ask your accountant what share of each payment to set aside and when to pay.
• Treat a materials deposit as the materials’ money. If a customer pays a deposit for materials, buy the materials before that money goes anywhere else.

The SBA says to consider hiring a certified public accountant (CPA), a bookkeeper or an online service, and notes that a bookkeeper can provide basic day-to-day functions at a lower cost. Starting out, a common split is:

Whoever does it, the books should be up to date at least once a month. If you use a bookkeeper, hand over the same three things every month: the bank and card statements, the receipt folder, and the list of invoices sent and paid.

Pick the same time every week, for example Friday afternoon, and go through this list. It’s the “keeping records” line of your business plan in practice:

1. Match this week’s receipts to the bank and card transactions
2. Send invoices for every job finished this week
3. Follow up on every invoice that’s past due
4. Check the cash balance against the next four weeks of bills
5. Move the tax set-aside to its savings account
6. Pay yourself, if it’s a pay week

A simple four-week cash view makes the fourth item take two minutes. Decide first the minimum you want in the account at all times; in this example it’s $1,500:

Example numbers. Week 2 is the one to watch: nothing comes in and the balance ends at $1,100, below the $1,500 minimum. Seeing it at the start of week 1 gives you a week to chase an invoice that’s due, ask for a deposit on the next job, or move a purchase to week 3.

• With my business structure, how should I record money I put in and take out?
• What share of each payment should I set aside for taxes, and when are the payments due?
• Which records do you want from me, how often, and in what format?
• Which purchases should I keep extra proof for, such as tools, equipment and vehicle use?
• What bookkeeping software do you work with?
• What should I have ready before our year-end meeting?

This week:

1. Ask two banks the questions in step 1 and open the business account.
2. Set up one place for receipt photos and photograph every business receipt from now on.
3. Record any money you’ve already put into the business as an owner contribution.
4. Put the weekly money hour in your calendar, on the same day and time every week.
5. Book a first meeting with an accountant and bring the questions above.

The SBA says you’ll need a business bank account no matter what kinds of payment you choose, and to open one as soon as you start accepting or spending money as your business. A separate account also keeps your business records clean, whatever your structure.

Money you take out of the business for yourself. Whether it’s called a draw or pay, and how it’s taxed, depends on your business structure. Record every transfer with the date and amount, and ask your accountant how to treat it.

It depends on your income, your structure and your state. The IRS says individuals, including sole proprietors, partners and S corporation shareholders, generally have to make estimated tax payments if they expect to owe tax of $1,000 or more when their return is filed. Ask your accountant for a percentage to set aside from every payment, and move it to a separate account each week.

How much does it cost to start a construction company? There is no single honest number. It depends on your trade, your state, the tools and vehicle you already own, and how quickly paid work comes in. The number you can trust is the one in your own startup budget, built from real quotes.

This guide shows you how to build that budget: what goes in it, how to separate one-time costs from monthly ones, how much cash to keep for the months before you’re paid, and how to turn the budget into a launch checklist with dates.

This guide is an introduction to building a startup budget and what to pay attention to. It isn’t financial, tax or legal advice. Use it to prepare your numbers, then go over them with an accountant, with an attorney for anything legal, and with your bank if you plan to borrow.

Because it answers the questions you’ll be asked anyway: what you need to buy, how much cash you need, and when the business can pay for itself. The SBA says calculating startup costs helps you estimate profits, do a break-even analysis, secure loans, attract investors and save money with tax deductions.

A budget also protects you from two costly guesses: buying equipment you didn’t need yet, and running out of cash before the first invoices are paid.

Split every cost into two groups. The SBA puts it this way: one-time expenses are the initial costs needed to start the business, and monthly expenses typically include things like salaries, rent and utility bills.

What you pay once to open:

• Business setup: registration and formation fees, license and exam fees, and the first meetings with a lawyer or accountant
• Tools and equipment: what your trade needs on day one
• Vehicle: a purchase, a down payment, or racks, shelving and signage for a vehicle you already own
• Safety gear and uniforms
• Marketing setup: a logo, a basic website, business cards, a sign for the truck
• Software setup, if anything has a one-time cost

What you pay every month, whether or not you have work:

• Insurance (or the monthly share of an annual premium)
• Vehicle payment, fuel and maintenance
• Phone and software subscriptions
• Storage or shop space, if you rent it
• Marketing
• Accounting or bookkeeping help
• Your own pay. Count it as a cost, not as whatever is left over. Markup vs. margin shows how your pay fits into your prices.

The SBA suggests counting at least one year of monthly expenses in your plan. That’s for planning how the first year looks, not cash you need on hand on day one.

An expense list is not the same as the cash you need. If you buy materials and pay for fuel before the customer pays you, and the first weeks bring less work than you expect, the bills arrive before the money does. Cover that gap with working capital: cash set aside to pay monthly costs until paid work catches up.

How many months to cover is your call, based on how fast you expect steady work. Put the number in the budget as a separate line so you can see it, instead of hoping the first jobs pay in time. Two guides help with the timing side:

• Construction cash flow: deposits, progress payments and keeping your own cash out of the customer’s job
• Contractor deposit laws by state: some states limit how much you can take up front

Every line in the budget should say where its number came from. The SBA recommends looking online and talking directly to mentors, vendors and service providers to see what similar companies pay.

For each line, keep three things:

• Estimate: your first guess
• Quote: the real price once you have one, with the date
• Source or assumption: the dealer, the insurance agent, the state website, or “my guess” until you know better

A line that still says “my guess” is fine on day one. It just shouldn’t still say that the week before you buy.

A one-person landscaping business that already owns a pickup truck. Landscaping starts with a lot of equipment, which makes the split between one-time and monthly costs easy to see; the method is the same for any trade. The numbers are made up to show the method. Use your own quotes.

One-time costs

Monthly costs

Cash to open

The owner wants three months of monthly costs set aside while the customer list grows: 3 × $4,220 = $12,660. Cash needed to open: $14,200 + $12,660 = $26,860.

Look at what the example separates. The mowers and the trailer are bought once. The truck costs nothing up front because it’s already owned, but its fuel and maintenance show up every month. And the insurance line still says “quote pending”, so the total isn’t final until that call is made.

A budget tells you what to buy. A launch checklist tells you what to do, in what order, by when. Give every task a date, an owner and what it depends on. Here is the same landscaper’s list, for an owner who is forming an LLC:

The setup roadmap covers what each of those steps involves. The “depends on” column is the useful one. In this example it shows why the bank account waits for the LLC to be registered, and why buying equipment waits until the money is in the business account. Your order may differ with your structure, state and trade.

Build your first budget this week:

1. List your one-time costs and your monthly costs, with a source or assumption on every line.
2. Add a cash cushion line for the months before steady paid work.
3. Mark every line that’s still a guess, and get a quote for the biggest ones first.
4. Pick your next three actions from the checklist and give each one a date.

It depends on your trade, your state, the equipment and vehicle you already have, and how many months of costs you want covered before work is steady. Build a startup budget with one-time costs, monthly costs and a cash cushion, and fill it with real quotes. That’s the only figure that applies to your business.

One-time costs are what you pay once to open, like tools, a trailer, registration fees and a website. Monthly costs repeat whether you have work or not, like insurance, fuel, phone, software and your own pay.

Often, at least in part. The SBA says you can typically deduct one-time expenses for tax purposes. How much, and in which year, depends on what each cost is and on your situation, so keep every receipt and ask your accountant before you count on a deduction.

Enough to pay your one-time costs and cover your monthly costs until paid work catches up. How many months that means depends on your trade, your season and how quickly you expect steady jobs. Go over the number with your accountant, and with your bank if you’re borrowing.