Should You Get a Contractors License?

Unfortunately, we handymen can’t just go out, buy a few tools, and start building houses. That’s illegal without a contractor’s license, and for a good reason.

Without these laws in place, the quality of our homes would be seriously compromised. People with no business in construction would be scamming and endangering homeowners (more than they already do). Despite my issues with the contractor’s board, I understand that law enforcers are a necessary evil.

However, many home services can still be offered without a contractor’s license.

In fact, I’ve run a very profitable handyman business without one. For me, getting licensed in a trade just doesn’t make sense, at least not yet.

But the real question is should you get a contractor’s license? Many of my readers have asked me this same question, and the answers I give might surprise you. Read on to learn what you should consider before studying and applying for a contractor’s license.

Disclaimer:  Construction law varies significantly in every country and state. Make sure to check your local regulations to help you make and informed decision.

Benefits of getting a contractors license

Obtaining a contractor’s license can make your business more profitable by offering a few benefits.

#1 – A boost in credibility – Credibility can help to build trust with your customers. It’s important to note that there are other, arguably easier, ways to gain credibility, but any way you can position yourself as a pro rather than cheap labor is beneficial. However, I wouldn’t expect that getting a contractor’s license will bring you a significant amount of new business. You still need to do some good marketing.

#2 – Ability to tackle larger projects – Having a license allows you to tackle larger and potentially more profitable jobs. Assuming you bid jobs appropriately, can sell your services, and then work efficiently, large projects such as kitchen and bath remodels can be more profitable than small repairs for several reasons.

#3 – Ability to tackle certain higher-paying projects – Speciality services like plumbing, electrical, HVAC, mold remediation, and many other projects can only be provided by contractors. That means there are usually fewer qualified people able to do these services, which allows you to demand a higher rate. As an unlicensed handyman, you are offering services that anyone can do, so in many cases, there is more competition.

#4 – Ability to hire subcontractors – Let’s say you were overly busy and needed to hire some help but didn’t want to bring on a permanent employee. You may consider subbing out jobs to other pros. That means you still get a chunk of the profits from each job you sell, but you don’t have to perform the labor. Having a contractor’s license allows you to do this legally. You can also hire subcontractors to help you complete parts of a project you are hired for.

While these benefits make getting a license seem like a no-brainer, here are some other things to consider before deciding.

How much contracting experience do you have?

If you are like me when I first started, meaning you have no experience bidding jobs, then a contractor’s license is probably the wrong choice.

For example, if you have never quoted a job, what are the chances that you are going to quote it accurately?

Close to zero.

And you’ll probably quote too low, which means you’ll lose money.

Trust me on this one. I’ve bid too low on way too many jobs. In fact, I lost over 50 grand in my first year to underbidding small jobs. If I had to learn my lesson on $10,000 jobs, I’d be out of business begging for food on the streets.

Regardless of how skilled at home repairs and improvements you may be, there are several business skills you must develop before quoting big jobs. And these business skills are arguably more important than your handy skills when it comes to making money.

What services do you plan on providing?

Before getting a license, make sure you will still be able to offer all of the services you are planning to offer.

In many states, like Nevada, where I live, getting a contractor’s license can limit the services you can legally provide. For example, without a license, I can do just about anything as long as it’s under $1,000 and doesn’t include plumbing, electrical, or HVAC. This leaves a lot open.

If I was to get a contractor’s license, I would technically be limited to only performing jobs within that license. Meaning if I got a carpenters license, I would no longer be able to legally offer painting, tile, drywall repair, and several other services that I occasionally provide for my customers unless I also go licensed as a general contractor or for each trade. Even a general contractor’s license would limit my services because be limited to projects that require at least three trades.

Since I like smaller jobs and quick repairs while doing a wide range of trades, a contractor’s license doesn’t make sense for my business model.

Are you sure you want to provide those services?

People often get licensed in a trade for the wrong reasons. Maybe because that is the trade they know how to do, or that is the trade they think they can make the most money. I recommend against this.

I’m a strong believer that you should enjoy what you do.

Without a lot of experience, it’s hard to even know the types of projects you enjoy. I didn’t know what types of jobs I liked doing until I had a couple of years of experience.

I’ve talked to many contractors that don’t like what they are doing. I even received an e-mail from a plumber saying that he hated plumbing! Too bad he put all that effort into getting a license.

So before getting a contractor’s license, you should be sure you like offering services related to that specific trade. Even though you may enjoy plumbing in your own home, this doesn’t mean you’ll like fixing other people’s toilets!

Here’s what I recommend

Before running out and getting a license immediately, get some experience offering several services first. Starting as a handyman is a great way to expose yourself to various projects while learning key business skills.

Not only will acquiring experience help you to choose a path you enjoy, but it will also help you uncover profitable services that you didn’t even think of.

Your handyman business experience will also teach you the business skills you need before risking your ass on huge jobs.

After a while, you’ll know what you enjoy, what is profitable, how to get customers, and how to run a business. At that point, you can graduate to the next level and go big with a contractor’s license.

Regardless of what you decide, make sure you understand your state laws by visiting your local contractor’s board website.

What do you think?  Is a contractor’s license right for you?

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