Starting a general contracting business involves more than filing an LLC and buying a truck. Before you ever manage a draw schedule or chase a pay app, you need a license, insurance, a bonding relationship, and a financial setup that doesn't fall apart the first time a sub invoice and a materials order land in the same week. (Somehow, they always land in the same week.)
Most startup guides hand you a checklist and call it done. They skip the part where your entity structure affects your bonding ceiling and your banking setup determines whether tax money survives long enough to reach the IRS. This guide covers the full startup sequence, the business plan template, and the banking setup that keeps cash separated once draws start landing.
7 steps to start a general contracting business
Most "how to start" guides give you a checklist with no context. Here's the sequence that matters, in roughly the order you'll hit each step, with the decisions that affect everything downstream.
1. Decide what you're building and for whom
Before paperwork, get specific. Residential remodels under $500K, ground-up commercial, tenant improvements, multi-family: each one carries different licensing tiers, insurance requirements, and bonding expectations. Your trade focus and project size range determine almost every decision below.
2. Form your business entity
Most new general contractors start with an LLC for liability protection. If you expect net income above roughly $50K to $60K, an S-Corp election is worth discussing with your CPA early; it changes how you pay yourself and how your financials look in a bonding review.
Register with your state's secretary of state, get your EIN from the IRS, and open a business bank account before you do anything else.
3. Get licensed
Licensing is where the rules stop being general and start being annoyingly state-specific. Most states have some type of licensing program for general contractors, but requirements vary enough that what applies in California is nearly useless in Texas. Some states handle licensing at the local level instead, so a contractor in Colorado or Connecticut is dealing with city or county rules, not a state board.
License tiers matter more than most new GCs realize. Many states tier their licenses by project size or scope:
Class A or unlimited license: lets you bid jobs above a certain dollar threshold
Residential-only or limited license: caps what you can take on by project type or value
Specialty classifications: cover specific trades or scopes within general contracting
Picking the right tier upfront matters. Applying for a higher classification usually means showing more experience, a bigger net worth, and stronger financials. Reciprocity between states is rare and partial, so if you plan to work across state lines, expect to apply separately in each one.
A contractor license is separate from a general business license. Most cities or counties require a business license before you operate at all, so you typically need both: the trade license to legally perform contracting work, and the business license to legally run the company doing it.
Across applications, expect common threads: proof of industry experience (often three to four years working under a licensed GC), exam results covering trade knowledge and business law, and evidence of financial standing including general liability insurance. Your entity needs to be registered and in good standing before you apply. Budget four to twelve weeks for the full process depending on your state, and check your state licensing board's website for specifics before you spend money on anything else.
4. Get insured
Insurance is non-negotiable: you often can't get licensed, bonded, or hired without it.
The core policies most new GCs need at launch are general liability (required by most states, banks, and project owners before you touch a job site), workers' compensation (required in most states once you hire your first employee, and sometimes needed before your license is issued), commercial auto (for business vehicles), and builder's risk (covers the structure under construction if materials or in-progress work gets damaged or stolen, frequently required by owners, lenders, or developers).
Get your policies in place before you apply for your license or bid your first job.
5. Establish a bonding relationship
If you plan to bid commercial or public work, you'll need surety bonds. Even for residential, having a bond program in place signals credibility. Surety bonds back your commitment to the project owner: if you walk off a job or miss code requirements, the bond covers it.
Find a surety agent early, before you need a bond, so you know what your initial capacity looks like and what financials they'll want to see. This relationship shapes your business plan.
6. Set up your accounting, payroll, and banking
Before the first draw hits, you need four things locked in. First, accounting software: QuickBooks Online, Sage, or a construction-specific platform, with job costing baked in from day one. Second, payroll: if you're running an S-Corp (or hiring anyone), set up payroll before your first project, because inconsistent owner comp creates problems in bonding reviews fast. Third, banking: multiple checking accounts (covered in detail below) so draws, taxes, and profit don't get mixed together. And fourth, a CPA who knows construction. Percentage-of-completion accounting, WIP schedules, and retainage handling are specialized enough that a generalist CPA will cost you more in cleanup than they save in fees.
Get these pieces working together before you take your first draw, not after.
7. Build your first pipeline
Most new GCs get their first contracts through one of three paths: referrals from their network (especially if transitioning from a subcontractor role), small residential projects where relationships and reputation matter more than bonding capacity, or bidding on smaller commercial projects where owners are willing to work with newer contractors.
Your business plan should show this pipeline clearly: what's signed, what's probable, and what's a maybe.
What should a general contractor business plan actually include beyond the basics?
Missing job-level detail sinks most general contractor business plans. It shows up the first time a bonding agent asks for a WIP schedule and you hand them a one-page summary that just says "$1.2M contracted."
Sureties look for character, capacity, and capital, and they want to see how your jobs behave when money is earned but not collected yet. If you want the business plan to double as a bonding-ready packet, every section needs to answer the follow-up question behind the follow-up question:
Startup costs: that you've priced the overhead honestly, including the reserve you'll burn before the first draw clears.
Job pipeline: that your backlog is real, not a list of "maybes" dressed up as signed work.
WIP schedule: that you know the difference between billed and earned, and that you're tracking which jobs are floating you and which ones you're floating.
"Money waiting on" list: what's submitted, when it was submitted, and who's holding it up (owner, architect, or lender). This is the one most plans skip entirely.
The question behind all of this is never "are you profitable on paper?" It's "can you float the gap?" Covering $65K in sub invoices during a three-week stretch before a draw clears is normal for a $1M to $6M general contractor, and your plan should show where that $65K comes from.
For the bigger picture on timing, our construction cash flow walkthrough maps the common choke points before you build your own forecast.
What does a bonding-ready general contractor business plan look like?
Structure, not length, separates a plan that gets funded from one that gets filed away. A 20-page narrative with no WIP schedule and no week-by-week forecast gives a bonding agent nothing to underwrite.
General contractor business plan outline template
Use this as a skeleton. The sections below are where plans fall apart, because they expose whether the money behind your numbers is real or still sitting in someone else's approval queue.
Company overview: Entity type, owner roles, licenses and insurance held, trade focus and project size range
Startup cost summary
Category | Estimated cost |
|---|---|
Contractor license and fees | $______ |
General liability insurance | $______ |
Bonding premium (first bond) | $______ |
Workers' comp (deposit or first quarter) | $______ |
Vehicle and fuel | $______ |
Tools and equipment | $______ |
Software (estimating, PM, accounting) | $______ |
Office / home office setup | $______ |
Operating reserve (6–8 weeks of bills) | $______ |
Total | $______ |
Job pipeline and backlog: Signed contracts, probable work, maybes (bids submitted, no response yet)
WIP schedule (see example below)
Financial projections: 13-week cash flow forecast, year one jobs on the books with job-level breakdown, owner compensation plan (W-2 salary + distribution schedule)
Banking and cash management: Account structure (Profit First buckets), draw allocation rules, tax set-aside percentage
Bonding plan: Target bond program size, CPA-prepared financial timeline, surety relationship (agent name, initial capacity)
WIP snapshot example
Here's a general contractor business plan example: a three-job WIP schedule for a contractor billing about $600K in active work. This is the format a bonding agent expects.
Job | Contract value | % complete | Costs to date | Billings to date | Over/under billed |
|---|---|---|---|---|---|
Martin Kitchen + Addition | $152,000 | 40% | $54,800 | $45,600 | Underbilled $15,280 |
4th Street Office TI | $318,000 | 25% | $71,200 | $79,500 | Overbilled $850 |
Elm Park Duplex Reno | $134,000 | 65% | $79,100 | $73,400 | Underbilled $13,710 |
Totals | $604,000 | — | $205,100 | $198,500 | Net underbilled $28,140 |
The contractor has earned roughly $28K more than they've been paid. That's $28K the business is floating. The plan needs to show where that float comes from: reserve, line of credit, or draw timing on the overbilled job.
How do you build draw timing into financial projections?
Timing gaps, not totals, break a general contractor's forecast. You feel it when a $38K materials order needs to ship, payroll runs Friday, and the pay app is still sitting in an architect's review queue.
Build the forecast around when money lands, not how much you "should" make this quarter. On a $150K kitchen-to-addition project, you might not see the first meaningful draw until rough-in. That means you're carrying framing, deliveries, and overhead up front.
Two things make forecasts lie if you don't call them out:
Approval lag: a pay app can be "submitted" for two weeks before it's "approved," and the clock to payment often starts after approval.
Change orders: work gets done, but billing doesn't happen until the paper is signed. Your plan needs a line for "earned but not billable yet," or you'll think you're behind when you're actually waiting on paperwork.
Retainage widens the gap on commercial work. If you're running three projects totaling $500K, a 5% to 10% holdback can tie up five figures you already earned. Put retainage on its own line in the forecast, with an honest release date, not "end of job."
What does a 13-week general contractor cash flow forecast look like?
Draw dates in your head, sub invoices in your email, payroll in your bookkeeper's system, and no single view that puts them side by side. The template below gives you the structure. The filled example shows what the first six weeks of a $150K addition look like when the first draw doesn't land until rough-in.
13-week cash flow forecast template
Fill in your own job names, draw dates, and bill amounts. Update it every Monday.
Wk 1 | Wk 2 | Wk 3 | Wk 4 | Wk 5 | Wk 6 | … | Wk 13 | |
|---|---|---|---|---|---|---|---|---|
Starting cash | $______ | $______ | $______ | $______ | $______ | $______ | … | $______ |
Money in | ||||||||
Draw – Job A | ||||||||
Draw – Job B | ||||||||
Draw – Job C | ||||||||
Other income | ||||||||
Total in | $______ | $______ | $______ | $______ | $______ | $______ | … | $______ |
Money out | ||||||||
Materials – Job A | ||||||||
Materials – Job B | ||||||||
Sub payments | ||||||||
Payroll (crew) | ||||||||
Owner W-2 | ||||||||
Insurance / WC | ||||||||
Tax set-aside | ||||||||
Permits / fees | ||||||||
Overhead (office, software, fuel) | ||||||||
Total out | $______ | $______ | $______ | $______ | $______ | $______ | … | $______ |
Ending cash | $______ | $______ | $______ | $______ | $______ | $______ | … | $______ |
Cash gap (if negative) |
13-week forecast example: $150K residential addition
Here's what the first six weeks might actually look like when the first meaningful draw doesn't land until rough-in is complete.
Wk 1 | Wk 2 | Wk 3 | Wk 4 | Wk 5 | Wk 6 | |
|---|---|---|---|---|---|---|
Starting cash | $42,000 | $28,450 | $18,700 | $7,200 | $2,950 | $38,700 |
Money in | ||||||
Draw – Martin Addition | – | – | – | – | $45,600 | – |
Total in | $0 | $0 | $0 | $0 | $45,600 | $0 |
Money out | ||||||
Materials (framing, lumber) | $6,800 | $4,200 | $3,500 | – | $2,800 | $3,100 |
Sub – excavation/foundation | $3,500 | – | – | – | – | – |
Sub – framing crew | – | $2,800 | $5,200 | – | – | $4,600 |
Payroll (1 laborer) | $1,750 | $1,750 | $1,750 | $1,750 | $1,750 | $1,750 |
Owner W-2 | – | – | – | $1,500 | – | – |
Permits | $500 | – | – | – | – | – |
Overhead (insurance, fuel, software) | $1,000 | $1,000 | $1,050 | $1,000 | $1,000 | $1,000 |
Tax set-aside | – | – | – | – | $5,300 | – |
Total out | $13,550 | $9,750 | $11,500 | $4,250 | $10,850 | $10,450 |
Ending cash | $28,450 | $18,700 | $7,200 | $2,950 | $37,700 | $28,250 |
The contractor starts with $42K in reserve and burns through most of it by week 4, bottoming out at $2,950 before the first draw hits in week 5. If the draw slipped one more week, the contractor would be short on payroll and materials. The plan needs to name that risk and show the backup: a line of credit, a second job's draw, or a bigger starting reserve.
Keep it simple, update it weekly, and use one job calendar as the source of truth. If you want a yardstick for how contractors tend to perform, the CFMA benchmarker is a useful reference.
What banking setup do you need when starting a business as a general contractor?
One checking account turns every draw into a guessing game. The $67K deposit from one job looks exactly like the money you need for another job's lumber delivery, and the tax money gets "handled later" until later shows up with penalties. The fix isn't more discipline with one account; it's more accounts with less guessing.
Profit First works for general contractors when you treat materials and subs as pass-through costs first. The draw hits, you move job costs out right away, and then you allocate what's left across separate accounts: Income (where each draw lands), Project/Job (materials and sub costs move here immediately), Profit (5%), Owner's Pay (10% to 15%), Tax (around 15%), and Operating Expenses (the remainder).
Draw allocation example: $67K draw
Here's how a single draw gets split the same day it lands:
Bucket | % | Amount | What it covers |
|---|---|---|---|
Project/Job | 60% | $40,200 | Sub invoices due this week, lumber delivery Friday |
Tax | 15% | $10,050 | Quarterly estimate set-aside |
Owner's Pay | 12% | $8,040 | Next biweekly W-2 run |
Operating Expenses | 8% | $5,360 | Insurance, software, fuel, phone |
Profit | 5% | $3,350 | Do not touch. Quarterly distribution only |
Total | 100% | $67,000 |
The Project/Job move happens first. If job costs on this draw run higher than 60%, the other buckets shrink proportionally, but Tax and Profit still get funded. That discipline is the whole point.
If you're running multiple jobs at once, some general contractors keep separate Project accounts by job. That isn't job costing, but it stops one project's deposit from quietly funding another project's spend.
To make this stick, you need a platform that supports multiple checking accounts and lets you automate the moves. Relay is built for this, since it supports up to 20 checking accounts with no monthly maintenance fees.
It also supports automated transfers so allocations happen when the draw hits, not when you remember on Sunday night. For a walkthrough of the method and the account logic, the Profit First guide covers the setup.
A common ramp is starting Profit at 1% and increasing by 1% each quarter. The win: your first quarterly tax payment stops being a surprise.
Build your general contractor business plan around cash you can touch
A business plan that survives year one reads less like a pitch deck and more like an operating manual: what happens in the gap between "we earned it" and "it cleared the bank," and the rules you follow when four jobs are active and the next draw is still a week out. That's also the version that holds up in a bonding review.
Construction is still a small-business world. According to the SBA report, over 81.6% of construction employment sits in small businesses. The ones that keep growing usually don't have better luck. They have cleaner books, clear cash buckets, and a weekly cadence that catches the gap before it catches them.
Relay supports up to 20 checking accounts with no monthly maintenance fees and automated percentage-based transfers. Get started with Relay to set up your Profit First allocation accounts before the first draw lands, so every deposit gets split the day it hits instead of whenever you get to the spreadsheet.
Frequently asked questions
How much cash do I need in reserve before taking my first general contractor contract?
Cover six to eight weeks of bills without a draw arriving. On a $150K residential project, that's often $30K to $45K to float materials, sub deposits, and payroll before the first progress payment clears.
Should I set up an S-Corp or LLC for my general contracting business?
It depends on your net income and how you're paying yourself. An S-Corp election changes the payroll tax math and tends to produce cleaner statements for bonding reviews. Work through it with your CPA and bonding agent at the same time, not separately.
What licenses and insurance do I need before starting?
Start with your state contractor license, general liability insurance, and workers' compensation if you'll have employees. Many states require proof of insurance as part of the license application itself. Add commercial auto coverage for business vehicles and a surety bond if you're bidding commercial or public work.
How do I handle retainage in my business plan projections?
Treat retainage as earned money you can't spend yet and give it a separate forecast line. Base the release date on past closeout timelines, not the best-case scenario.
When should I set up Profit First accounts for my general contracting business?
Before the first contract. Set up the accounts when you open your business bank account so the first draw gets allocated correctly. Start small (like 1% to Profit) and step it up quarterly.
What do bonding companies actually look for in a new general contractor's financials?
Clean statements and a clean story. Expect requests for WIP, backlog, money you're waiting on, and an owner comp setup that makes sense for an owner-operator. Many first-time bond programs ask for CPA-prepared financials and consistent bookkeeping, not just a big bank balance.
How do I model draw timing for projects in my first year?
Put every job on a simple calendar. For each milestone, list the expected draw date next to the bills due before that draw clears. The weeks where bills beat deposits show the cash gap your reserve has to cover.
