Starting a flooring business is an exciting opportunity that combines creativity with practical skills. Whether it’s hardwood, tile, carpet, or any other type of flooring, the process of launching a successful flooring installation business requires thoughtful planning and execution. Many successful flooring business owners start by working in the field, gradually building their skills, and then stepping into entrepreneurship when they feel confident in their abilities.
In this guide, we’ll explore the essential aspects of the flooring industry, including an overview of the business, steps to get started, and answer common questions.
A flooring installation business removes old flooring, installs new flooring, and performs flooring repairs, either for residential or commercial customers, or both. A flooring company may offer many different types of flooring options, such as wood flooring, hardwood flooring, laminate flooring, linoleum, vinyl, carpet, or tile flooring, while others may specialize only in certain types of flooring.
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The flooring industry generated $29.8 billion in revenue during 2022 and has seen steady growth over the past five years. As homes and commercial buildings require new floors or replacement, demand rises, and with trends toward hardwood floors, natural stone, and environmentally friendly materials, a flooring business can capitalize on these opportunities.
The flooring industry is sensitive to economic fluctuations and the strength of the housing market. Overall economic conditions influence consumer spending on big ticket home improvement projects like new flooring. A strong economy equates to higher sales.
Staying abreast of industry trends is vital for any successful flooring business. Current trends include a growing preference for environmentally friendly and sustainable flooring options, innovative designs, and high-quality materials. Additionally, the demand for home improvement and renovation services has increased, offering potential growth opportunities for flooring businesses.
The target market for a flooring business can be quite diverse and typically falls into two main categories: residential and commercial clients.
- Residential clients: These are homeowners who need new flooring for their homes, whether for a new construction, a renovation project, or a simple replacement of old, worn-out floors. This could include individuals, families, or property owners.
- Commercial clients: These include businesses that need flooring for their offices, retail spaces, restaurants, hotels, schools, hospitals, and other facilities. It could also include property developers or building contractors who are constructing new commercial buildings.
Within these two broad categories, a flooring business may choose to specialize even further. For example, some might focus on high-end, luxury installations; others might specialize in budget-friendly options; some might cater specifically to eco-conscious customers by offering sustainable flooring materials.
Checklist To Start A Flooring Installation Business
Starting a successful flooring business takes careful planning and preparation. From conducting market research to registering your business to securing funding, many steps are involved before opening your doors.
While each business has unique needs, checking off these common startup steps helps ensure your flooring company launches successfully.
Step 1: Assess the Market
Understanding the demand in your target market is an important step before starting any business, including a flooring business. Market research provides insights into industry trends, competition, and potential customers. This research also helps entrepreneurs understand their target market, develop effective marketing strategies, and make better informed decisions about their products or services.
Why Research Demand Before Starting a Business?
Market research allows you to validate your business idea and determine if there is sufficient demand for a new flooring service before investing significant time and money.
How to Research Demand for a Flooring Business?
- Competitor analysis: Look at similar flooring businesses in your area. How many are there? What services do they offer, and at what price? If there’s a high concentration of flooring businesses, it could indicate a strong demand. However, it also means more competition.
- Online reviews: Check reviews for existing flooring companies to identify customer complaints and unmet needs your business could fulfill. Resources like Yelp and Google My Business offer reviews.
- Job listings: Search job listing sites like Indeed for flooring installer job openings, which may indicate unmet demand and business growth opportunities.
- Talk with related business owners: Join local business and homebuilder associations to network and research trends impacting flooring demand through conversations with contractors, interior designers, realtors, and other members.
- Local building permits: Check with your local government office for information on building permits issued in your area. A rise in permits can suggest an increase in construction activity and potential demand for flooring services.
Thorough market research provides the data you need to decide if starting a flooring company in your area makes good business sense. While it takes some effort upfront, it can save you from costly mistakes down the road.
Step 2: Write a Business Plan
The next step, while not a requirement (though it may be if funding is needed), is writing a business plan. Outside of funding, a business plan should be written because it gets the ideas out of your head and onto paper, revealing strengths, weaknesses, and gaps to address before launch.
If funding is needed, lenders will almost always require a business plan. A few sections that they will be interested in include:
- Market analysis: This section presents the findings from your market research, showing that there is a demand for your flooring services. It should include information about your target customers, competition, and industry trends.
- Services: Here, you should detail the types of flooring services you’ll offer. Will you focus on residential or commercial clients? What types of flooring materials will you specialize in? This section should show that your services align with what your target market needs.
- Marketing and sales strategy: This outlines how you plan to attract and retain customers. For a flooring business, this could include strategies like partnering with local real estate agents or home improvement stores, offering special discounts, or showcasing your work on social media.
- Financial projections: This section should provide a clear picture of the financial aspects of your business, including startup costs, projected income, and break-even analysis. It shows potential investors that your business can be profitable.
- Management team: The success of any business is often linked to the people behind it. Detailing your management team – their experience, skills, and roles – can give potential investors confidence in your business’s ability to succeed. For a flooring business, having team members with experience in construction, interior design, or customer service can be quite beneficial.
Related: How to write a business plan
Step 3: Source Funding
At this stage, you have information that supports the need for a flooring business and have a business plan written which shows the business should be profitable.
This leads us to our next step, where we look at making sure the money is available to start the business. Securing sufficient funding can be a major hurdle when starting a flooring business.
The first and most accessible source of funding is often personal savings. Using your own money to fund your business means you don’t have to worry about loan repayments or interest rates.
Depending on the scale of your flooring business, personal savings may cover all or just a portion of your startup costs. The common sources of outside funding for a flooring company include:
Friends and family: Another potential source of funding is loans or investments from friends and family. This can be a viable option, but it’s important to treat these agreements professionally. Ensure all terms are put in writing to avoid misunderstandings that could strain these relationships should things not go as planned.
Bank loans: For a flooring business, traditional business loans are a common option. Lenders typically require a borrower to invest at least 15% of their personal funds, have a good credit score, and provide sufficient collateral. If the bank feels the loan is too risky, they can use an SBA loan guarantee to secure it.
Microloans: Microloans are another option, particularly if your funding needs are low or traditional credit isn’t available. These are small, short-term loans offered by local economic development organizations. Some microloan programs even provide business training alongside funding, making them a valuable resource for new entrepreneurs.
Line of credit: A line of credit for a flooring company operates much like a personal credit card, providing the business with a set amount of funds from which it can borrow as needed. This type of financing is often used to manage short-term expenses, such as purchasing inventory for jobs, payroll, or unexpected costs.
Step 4: Register the Business
Starting a flooring business involves carefully laying the legal groundwork to ensure that your business is built on a solid and compliant foundation. From selecting the right structure that fits your goals and offers the appropriate protection to registering your business name and securing the necessary licenses, each step is a critical plank in building your flooring business.
Every state has different requirements, but here is a general overview to help you get started.
Business structure: When starting your flooring business, one of the first things to decide is the type of business structure. Each has its merits, and the choice may vary depending on your specific situation and location.
- Sole proprietorship: This is the simplest structure, often chosen for its ease of startup and low cost, though if the business is sued, the owner is personally liable. It’s suitable if you’re planning to run the business by yourself.
- Partnership: If you plan to start the business with someone else, a partnership might be a suitable choice. It allows shared responsibility and investment, but the owners are personally liable.
- Limited Liability Company (LLC): Unlike a sole proprietor or partnership, the LLC offers liability protection, meaning your personal assets are separated from the business. This might be preferred if you want to safeguard your personal assets from any business liabilities.
- Corporation: A corporation offers similar liability protection to an LLC but is typically more complex and might be suitable for larger or expanding flooring businesses.
Related: Comparison of business structures
Forming an LLC sounds complicated and expensive, but using an entity formation service guides you through the process so you know it was done right.
Some popular LLC formation services include:
IncFile - $0 plus state fees & free registered agent for 1 year!
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Business name registration: After registering the business structure, you may need to register your business name. This process will vary depending on what business structure you pick. Sole proprietors and partnerships will often be required to register a “Doing Business As” (DBA), while corporations and LLCs register with the state during the formation process.
During this time, it’s also a good idea to check if the name you want is available as a web domain, even if you’re not ready to set up a website yet.
Obtain business licenses and permits: A contractor’s license will be required for a flooring install business in some states and cities where the customer is located. Before starting a job, be sure to check local requirements.
Also, depending on your location, there will likely be a variety of general licenses or permits needed before opening. This could include a business license, seller’s permit, and Employer Identification Number (EIN).
Step 5: Find a Location
The next step is determining where you’ll operate your business. Many flooring businesses, especially in their early stages, are run from the owner’s home. This approach offers several advantages, including cost savings and flexibility.
Even though you’re working from home, it’s essential to have a dedicated workspace. This area should be free from distractions and equipped with everything you need to work effectively. It could be a spare room, a renovated garage, or a quiet corner of your house. Regardless, your space should include somewhere to securely store flooring materials and equipment.
Before dedicating your home, be sure to check with your local zoning laws to ensure that running a business from your home is allowed. Some residential areas and landlords have strict rules about commercial activities.
Step 6: Set Up Suppliers
Finding reliable suppliers is a crucial step in starting a flooring business. Just as a floor is only as good as the materials used, your flooring business will depend on the quality and reliability of your suppliers. Since most suppliers require that the business is registered before providing pricing or setting up accounts, it’s important to have these aspects of your business sorted out before approaching potential suppliers.
If you haven’t settled on suppliers, attending industry trade shows can be a great way to connect with flooring manufacturers and distributors. Major events include Surfaces, Coverings, Domotex USA, and NeoCon. Alos, industry associations like the World Floor Covering Association and National Wood Flooring Association can be good resources to find reputable suppliers.
Step 7: Purchase Equipment & Supplies
Once funding is secured, the business registered, and suppliers lined up, the next step is to obtain the necessary equipment. As a flooring contractor, having the right tools is crucial to ensure efficient and quality work.
First, you’ll need to take stock of what you have and identify what equipment is still needed. Your exact needs might vary depending on the type of flooring services you offer. Some of the essential tools include a floor scraper, floor roller, floor cutter, sanders, saws, trowels, levels, and a tape measure.
Step 8: Create a Marketing Plan
Marketing and acquiring customers is often one of the biggest challenges for a flooring contractor. You will face a lot of competition, so your marketing will need to make you stand out, and your prices will need to be competitive. You’ll make a lot of bids on jobs, and you won’t get them all, so you’ll need to be patient and constantly work to get new leads.
Common marketing techniques for a floor installation business include:
Website and SEO: Building a modern, user-friendly website is step one in your online marketing strategy. Once your website is up and running, optimizing it for search engines (SEO) can help increase visibility and attract more customers. This could involve writing blog posts and articles relevant to your potential customers.
Pay-per-click advertising: Pay-Per-Click (PPC) advertising can also be a highly effective online marketing strategy for your flooring business. With PPC, you only pay when someone clicks on your ad, making it a cost-effective way of driving traffic to your website.
Social media marketing: Social media platforms like Facebook, Instagram, and Pinterest can be effective tools to showcase your work and engage with potential customers. As you complete jobs, be sure to get lots of pictures and testimonials to display your skills and the quality of your work.
Claim your business online: Claiming your business on relevant online business directories, including Google Business Profile, Yelp, and Angie’s List, can help improve your visibility online. These platforms allow customers to leave reviews, which can significantly influence potential clients’ decisions.
Email marketing: Email marketing can be a powerful tool for staying in touch with your existing customers and reaching out to potential ones. Regular newsletters can keep your audience updated about new products, special offers, or valuable tips related to flooring.
Leverage referrals: Many customers come from word-of-mouth referrals. Provide exemplary service so customers refer friends, family, and neighbors. Also, building relationships with general contractors, home builders, interior designers, etc., can help generate potential customers.
Print/direct mail: – Mailers, door hangers, flyers, and brochures can be a good source of leads.
Joining Chamber of Commerce: Joining your local Chamber of Commerce can provide networking opportunities and give your business additional credibility. It can also open doors to local business partnerships, which can be another effective way of promoting your business.
Step 9: Hire Employees
Whether you’re planning to hire right away or down the road, bringing employees into your business is a significant step that involves more than just finding the right talent. Understanding and adhering to various legal requirements is a key component of this process. Each state has different requirements, but here is a brief overview of employer responsibilities:
- Classify workers properly: Misclassifying workers as contractors rather than employees can lead to state and IRS penalties along with back taxes.
- Obtain an Employer Identification Number (EIN): This is a must for tax purposes and can be obtained from the IRS. It’s like a Social Security number for the business and a requirement for reporting income and payroll taxes.
- Compliance with labor laws: Labor laws can be complex, but they’re there to protect both employees and employers. This includes meeting minimum wage regulations, paying for overtime when applicable, and maintaining a safe work environment. These aren’t just best practices; they’re mandated by law.
- Providing workers’ compensation insurance: In most states, providing workers’ compensation insurance is non-negotiable. This insurance covers medical expenses and wage loss if an employee is injured on the job.
- Set up payroll: You’ll need to report and pay employment taxes on a regular schedule. Using a payroll service can help with compliance.
Related: Hiring your first employee
Step 10: Prepare to Open!
Starting a flooring business is an exciting adventure, but before you roll out the welcome mat and open the doors, several key areas will likely still need to be finalized. These steps are not a one-size-fits-all blueprint, as every business will have different needs, but here are some common loose ends to address before starting your flooring business.
Business insurance: Protecting your business against unexpected mishaps is essential. General liability insurance can protect against third-party injuries and property damage, while commercial property insurance can cover damages to your business property.
Bookkeeping: Proper financial management is the backbone of any successful business. You’ll need to set up a system for tracking expenses, revenue, invoices, and more. Consider hiring a bookkeeper or using accounting software tailored for small businesses, such as Wave Accounting (FREE) or Quickbooks
Contracts: Have standard contracts ready for different scenarios, such as agreements with suppliers, customer service contracts, and possibly installation contracts if you’ll be handling that aspect.
Bank account: Separate your business and personal finances by opening a dedicated business bank account. This helps with tracking expenses, filing taxes, and maintaining professional financial records.
Pricing: Establishing a clear pricing strategy is essential. Consider all costs, from materials to labor, and ensure that your pricing is competitive while still allowing for profit.
Accepting credit cards: Credit card payments are a standard expectation for most customers. Set up a reliable credit card processing system like Square or Stripe to make transactions smooth and secure.
Common Questions When Starting A Flooring Business
How much does it cost to start a flooring installation business?
Starting a flooring business requires an investment in various essentials that can total anywhere from $15,000 to $50,000 on average for a small to medium-sized operation.
Let’s break down the various costs to give you a better understanding of what you can expect.
Tools and machinery: You’ll need equipment like tile cutters, nail guns, sanders, and more. Expect to spend $2,000 to $5,000 on these essential tools.
Vehicle: To travel to client appointments and transport tools and materials, a van or truck and possibly a trailer will be necessary. If you don’t already have a suitable vehicle, this could range from $5,000 to $30,000.
Business license: Depending on your location, a business license can cost anywhere from $100 to $500.
Contractor’s license: If required in your state, this can range from $300 to $1,000.
Insurance: While the exact cost will vary depending on factors like location and coverage, expect to pay a few hundred dollars for your first year’s premium for general liability insurance
Marketing: Initial marketing expenses can also vary widely, but a modest budget of around $1,000 could cover the creation of a website, business cards, and some local advertising.
Office supplies: Expect to spend $200 to $500 for necessary office items.
Computer and software: A computer and necessary software can cost between $1,000 to $2,500.
While these figures provide a rough estimate, it’s important to remember that every business is unique, and actual costs can vary based on numerous factors.
In addition, it’s worth considering having a financial buffer of three to six months of operating expenses on hand to cover any unexpected costs or challenges that may arise. This can provide the financial stability needed to navigate the early stages of your business and set the foundation for long-term success.
How profitable is a flooring installation business?
The profitability of a flooring business can vary significantly based on factors such as location, size, overhead costs, and the specific services offered. However, looking at industry statistics can provide some insight into potential earnings.
In 2022, there were 117,375 flooring installers that generated $29.8 billion in sales. Using these numbers, we can calculate that the average flooring installation company generated $253,887. Since this is likely for a well-established business, let’s use $125,000 for the first year revenue for a new flooring company.
Now, let’s break down the expenses using some industry data:
Material costs: Often, 35% of the revenue, which would be $43,750
Labor costs: Around 30% of revenue, amounting to $37,500
Overhead and other operational costs: These could include rent, utilities, marketing, and insurance, accounting for approximately 10% of the revenue or $12,500.
Adding these expenses, the total would be $93,750.
Given these figures, here’s how you might calculate your profit:
This would translate to a profit margin of 25%, which is a realistic figure for a flooring business operating efficiently. However, it’s important to note that these are rough estimates, and actual earnings can vary based on a wide range of factors.
What experience is needed to run a flooring business?
Starting a flooring installation business does require some specific experience and knowledge. Here’s a breakdown of what you’ll likely need:
Technical skills: Understanding various flooring materials (such as hardwood, tile, laminate, or carpet) and knowing how to install them is essential. These skills can be acquired through technical courses, apprenticeships, or on-the-job training with an experienced flooring installer.
Hands-on experience: Working under an experienced flooring installer or being employed in a flooring company can provide real-world exposure. This hands-on experience is invaluable as it helps in understanding the nuances of different projects and how to tackle unique challenges.
Customer service skills: Dealing with clients and understanding their needs is part of the business. Experience in sales or customer service could be beneficial.
Business management skills: If you’re looking to run your own business, having some background in business management or taking some basic business courses can help you understand aspects like marketing, finance, and operations.
Understanding building codes and regulations: Knowledge of local building codes and regulations ensures that the installations are compliant with legal requirements.
Problem-solving skills: Flooring installation can be complex, and problems might arise that require creative solutions. Experience in troubleshooting and problem-solving is helpful.
Physical fitness: Flooring installation is physically demanding work, so maintaining good physical health is key.
While it’s possible to start with limited experience and learn along the way, having a combination of technical expertise, hands-on experience, and business acumen will set you on a path to success more rapidly.
What is the NAICS code for a flooring installation business?
The NAICS code for a commercial flooring installation business is 238330.
The NAICS code (North American Industry Classification System) is a federal system to classify different types of businesses for the collection and reporting of statistical data.
Related: What is a NAICS code?