How to Start a Welding Business
Are you a skilled welder but tired of working for someone else? You may have considered starting your own welding business, but you’re not sure what is involved. Owning a welding business involves a lot of selling and business acumen, as well as superior welding skills. If you think you have what it takes and are ready to be your own boss, there are some basic things that you should know, and you’ll need to do some research on your own.
Simply put, a welding business repairs and builds metal-based items. Welding businesses can be either mobile-only, traveling to customers to make repairs, or have a fabrication shop that focuses more on building metal items. Examples of things that might be built or repaired include car bodies or frames, machine parts, aluminum welding, trailers, structural elements of architecture, tools, and much more. Consumer products include metal fences, handrails, gates, metal doors, shelf brackets, and furniture.
According to Fortune Business Insights, welding was a $19.53 billion industry in 2019 and is expected to grow to $27.22 billion by 2027. There is a large shortage of welders currently in the United States, so demand for skilled welders is high.
The welding industry is sensitive to market volatility because sales are often business to business (B2B). As other businesses suffer in an economic downturn, the demand for welded parts (such as car parts) and machinery declines.
Applications in welding have expanded due to advances in tools and new tools that require welding, which is why the industry will continue to grow. However, due to the welder shortage, automation of various types is becoming a part of the welding process. Welders need to be aware of new processes and techniques to keep up with changes in the industry due to advancing technology.
Target customers for a welding business include manufacturers, construction companies, farms, and any type of business that utilizes metal machinery. Sales to these customers are generally direct sales, so pounding the pavement and making sales calls are the best ways to reach them.
Skills, Experience, and Education Useful in Running a Welding Business
Since welding is a very specialized business, there are specific skills that you should have to be successful.
- Welding education and experience. You will need credibility to be successful, so you should have advanced welding certifications and a length of experience in welding to own your own welding business.
- Knowledge of trends. You need to keep your skills updated to keep up with advancing technology that affects the welding industry.
- Business knowledge and experience. You will need to have some basic knowledge of marketing, contracts, finance/accounting, and human resources.
- Sales. You have to be able to cold call potential customers or visit them in person in order to win their business. Sales experience, particularly B2B sales, can be invaluable to a welding business owner.
- Customer service. You’ll need to be able to build rapport with your customers so that you retain them as customers and gain repeat business and referrals.
Checklist for Starting a Welding Business
If you’re thinking about starting your own welding business, there are a few things you should keep in mind. Here is a checklist of the essentials to get started.
Step 1: Write a Business Plan
After coming up with the idea, the next step in starting your welding business should be to write a business plan. The business plan will make you focus on some important aspects of the business, such as who your customers are, how you plan to reach them, projecting sales and expenses, your value proposition to use for marketing, and more. You’ll also need to do some research to calculate exactly what your startup expenses will be.
Not only will a bank require you to have a business plan if you need financing, but multiple studies have shown that having a good business plan increases the odds of starting a successful business. Writing the plan helps you think through all the aspects of the business and then serves as a guide as you begin.
Related: How to write a business plan
Step 2: Name the Business
Finding the perfect welding shop business name can be challenging. Not only does the name have to reflect what you do and be appealing to customers, but it also has to be available to use. You can check your state’s website to see if the name is available and register your name. Your name should make you stand out, reflect your brand, and tell potential customers exactly what you do.
Step 3: Form a Legal Entity
A business entity refers to how a business is legally organized to operate. There are four primary business entities to choose from, which include the sole proprietorship, partnership, corporation, and Limited Liability Company (LLC). Each type of entity has its own pros and cons, such as liability exposure, costs, and administrative requirements.
When deciding on which business entity is best for a welding business, it normally comes down to the sole proprietorship and Limited Liability Company.
A partnership opens the owners up to unnecessary personal liability because if a partner does something to get the business sued, or runs off with cash from the business, the other partners are personally liable to repay. The corporation can be a good choice because it separates the business assets from the owner’s assets. If the corporation is sued or certain business debts can’t be paid back, the owners aren’t personally responsible to repay them. The downside to the corporation is that it is more complicated than all the other entities and requires more administration than the LLC. If you plan on raising a lot of investment though, the corporation is usually the better choice.
That leaves the sole proprietorship and LLC.
The sole proprietorship is the least expensive and easiest entity to start which is appealing. The downside is the owner is personally liable should anything happen to the business, which is an important consideration. The LLC offers the ability to operate as a sole proprietorship with the liability protection of a corporation. Depending on the state, the cost to form an LLC runs from $40 – $500, which is pretty inexpensive for protecting the owners from business-related lawsuits and certain debts.
Related: Guide to forming your LLC
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!
IncAuthority - $0 plus state fees & free registered agent the first year!
ZenBusiness - $49 plus state fees & free registered agent for 1 year!
Step 4: Select your Location
If you decide to have a shop, it’s good to be in an industrial area, so you are close to potential customers and get visibility from your signage. A small mobile welding business will often operate from the owner’s home, though a warehouse may be needed to have a base of operations or store equipment. If operating from home, be sure there are no restrictions from operating from your residence.
Related: Choosing a business location
Step 5: Apply for Business Licenses and Permits
Most states and cities don’t require a business license to provide welding services, however New York is one state that does.
In addition to welding-specific licensing there are some general local, state, and federal business registrations a welding business may need. A few of these include a sales tax permit and an Employer Identification Number.
Step 6: Find Financing
Coming up with a good business idea and having the skills to run it are one thing, but getting the funding to start a welding business is another. In order to get a loan, the borrower(s) will need to have good credit and be able to invest 15-25% of their money towards the total start-up costs. Startup costs for a welding business are fairly significant unless you already have a shop at your home and a truck or van.
Step 7: Open a Business Bank Account
Keeping your small business and personal finances in separate bank accounts is important to track the income and expenses of your business and identify trends.
Many banks offer free business checking accounts, so be sure to find a cost-effective option for your business.
Step 8: Get your Marketing Plan in Place
A welding business will need to set aside a budget to cover marketing costs on a continuous basis. Common marketing techniques for a welding business include social media marketing, online advertising, print advertising, direct mail advertising, and coupons or special promotions.
One important marketing task is developing an online presence. A website developer may be out of the budget, but Wix makes it easy for non-technical people to get a website running quickly and affordably.
Step 9: Get Business Insurance
There are several types of insurance to consider when starting a welding business. A few of these include:
– General liability insurance can help protect you from third-party claims of bodily injury and property damage.
– Professional liability insurance protects you from claims of professional errors or negligence that result in a financial loss.
– Worker’s compensation insurance covers expenses like medical bills and legal fees that a business might face if an employee were ever hurt while working.
The cost to insure a welding business will vary depending on several factors. To get the most accurate idea of what to budget for insurance, request quotes from multiple providers. When comparing the quotes, consider not only the premiums but also how the plan exclusions, coverage limitations, and deductibles compare.
Step 10: Hire Employees
You may need additional labor to help you run the welding service as you grow your customer base. If you hire additional welders, you will want to make sure they’ve had the right training and experience.
In addition to salary costs, your budget will also need to include other employee-related expenses. Workman’s comp insurance, unemployment insurance, and paid time off are common expenses that a business will need to cover when hiring staff.
Related: Hiring your first employee
Step 11: Set up an Accounting System
Setting up an accounting system for your welding business is critical to the long-term success of your business.
Staying on top of taxes not only keeps the business out of trouble with the government but the numbers can be used to track and monitor trends and cash flow in the business and maximize profits.
The thought of accounting can be intimidating for a lot of new entrepreneurs. There are a number of ways of handling bookkeeping, from DIY to hiring a bookkeeper. These include:
- Pen and paper - Low expense, but difficult to track.
- Spreadsheet - Low expense, but easy to make errors.
- Accounting software - Medium expense, but owner typically inputs expenses. Some great accounting software programs include Freshbooks or Wave Accounting.
- Hire a bookkeeper - Higher expense, though very affordable at $100-$200 per month in most cases. A dedicated bookkeeper will probably save money because, in addition to handling all of the bookkeeping (so you can focus on the business), they also provide personalized tax advice and ensure the business is in compliance.
Find bookkeepers in your local area or use a service like 800Accountant.
How much does it cost to start a welding business?
The costs to start a welding business will vary depending on whether you are going to be mobile only or have a shop.
– Welding license – Varies by the state licensing board but expect $150 – $200
– Welding equipment (TIG, MIG, multipurpose welder) $1,000 +
– Welding tools (plasma cutter, air cutter, milling machine, lathe, fume extractor, etc.) $2,000
– Initial supplies (electrodes, gas, pipe, etc.)
– Safety gear such as gloves, goggles, welding helmet, etc. – $100 +
– Van or truck $10,000+
– Downpayment or initial months lease $500 +
How much does a welding business owner make?
A welder typically starts at $30-40 per hour but can command a higher price depending on the welding services they provide. Higher-priced welding services can include mobile welding, underwater welding, breakdown welding, and others. As a welding business owner, it will be up to you to get clients and grow your business. The average welding business makes about $70,000 annually, but a successful business can grow to well into the six figures.
Are there grants to start a welding business?
It’s extremely rare to find a grant to start a welding business. If you search for business grants, you will come across a lot of scams and misinformation. Occasionally an organization will offer grants to start a business, however, be skeptical and don’t provide any sensitive personal information or pay money to get more information.
Legitimate federal grants can be found at Grants.gov and you can check on your state’s economic development office to see if they have any grants available.
What is the NAICS code for a welding business?
The NAICS code for a welding business is 811310.
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.
American Welding Society