#180- How profitable is general contracting?

In today’s episode of The Sweaty Startup, Nick talks with Matt Baker, a general contractor from Houston, Texas. A general contractor is someone who meets a customer, gets an idea of what remodeling/construction work they want done, and gets them an estimate, subcontracts the workers for the project, and makes sure the project is managed well. They discuss how Matt got started, what advice he has for someone just starting, and how profitable being a general contractor is.

A little about Matt

He started in the construction field as an electrician for the navy when he was 24 because he didn’t really know what he wanted to do in life. After 6 years of that, he spent some time working as an industrial electrician in Texas. In 2015, he had saved up enough money from the Navy and his electrician job to go in with a partner and buy several homes.

After finding success with the first few homes, they decided to buy a multi-family property that needed a lot of fixing up. After contacting several GC’s to get quotes, they got ridiculous prices of 25-30k for a 300 sq/ft apartment. That’s when he started doing the subcontracting himself, and by happenstance he got useful experience and found out he could become a GC. Over the years he has grown their business, and eventually left to start his own general contracting business.

2020 Profit/Loss

  • In the 3-4 month span from when he started his own GC business, Matt has made $152,000 in billable sales. In that time he also locked in several projects under contract estimated between $300-400k.
  • Out of the $152k, $103k was paid to subcontractors who worked on the projects, equaling out to 66% of the overall billed work. That leaves 34%, or $49k, to go straight to Matt.

Insight and advice from Matt

  • You don’t need experience working with tools or being handy. As a subcontractor, being knowledgeable about the work that is being done is invaluable and very helpful, but the subcontractors that you hire out will be the ones doing the work.
  • Start a general contracting business by yourself, so you don’t have to split the profits. You can manage it by yourself as long as you have good workers, and building up a solid client base FIRST before hiring additional employees is the best way to guarantee a decent profit.
  • Overhead for starting a GC business is very low. Because you’re not doing the work, there’s no need to drop thousands of dollars on tools and equipment. Matt’s main expenses are his website (Squarespace), Quickbooks, Asana, Google Admin, plus whatever he takes out for his own salary.
  • Vet your potential customers before visiting and quoting. On the phone, make sure they understand the potential cost of whatever project they want done. There’s a big difference between a $5k job and a $20k job.
  • The BEST way to gain experience is to spend a couple years working for a “production home” construction company, who builds hundreds of houses that are very similar. Doing this, you will learn all of the ins and outs of drywall, plumbing, electricity, and more. Once you feel comfortable with that, switch to a custom home building to learn the more intricate jobs.
  • Whatever jobs you do, always keep a book of great and reliable workers you meet. One of the best ways to set yourself apart as a GC is to have plenty of reliable workers on hand.
  • Always be friendly and attentive. Many general contractors don’t answer their phone, give bad quotes, or are not very personable. Just being a trustworthy, reliable person can set you leagues above the rest.
  • Adaptability is key. Being able to text a client instead of call, or having a great website where someone can sign a contract online, or knowing what trends are going on are all key to maintaining a solid customer base.

Follow Matt and see photos of projects he’s done by following him on Instagram!

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About Me

I started the Sweaty Startup in December of 2018 because I believe the Shark Tank and Tech Crunch culture is ruining the real spirit of low-risk entrepreneurship.