How to Start an Insulation Installation Business

Overview

How to Start an Insulation Installation Business

Are you a champion for sustainability and healthy living? Do you know your rockwool from your spray foam? Are you passionate about good craftsmanship and enjoy a customer-focused work environment? Then setting up your own insulation installer business might be exactly what you have been looking for.

Business Overview

Insulation installing businesses advise on and fit insulation material to commercial buildings, homes, and even equipment to prevent or reduce heating and cooling loss. Your craft will directly contribute to lowering energy bills and reduce the environmental impact of buildings; it will increase the comfort, safety, and well-being of people using a space.

In order to have a successful insulation business, your business will need an excellent reputation to build on, with an emphasis on expert workmanship and professional customer service and advice.

Industry Summary

According to IBISWorld, the insulation contractor industry in the US is mainly made up of smaller businesses, none with a market share greater than 5%. However, the insulation materials industry forms an ever-increasing and important part of the American economy, employing over 400,000 people across the US.

In recent years, improving insulation has become a central consideration beyond the federal regulations on building insulation. The benefits of good insulation are such that according to the ICAA, many local and state governments, as well as utilities, offer extensive financial incentives and subsidies for installing insulation. Did you know, for example, that installing attic insulation provides a higher return on investment (107%) than any other home remodeling project?

Industry Trends

According to IBIS World, the insulation sector is expected to continue to return to strong growth over the next five years, very much in line with the rebounding residential and commercial construction activities in the US. Add to that the conscious move towards more sustainable and energy-efficient construction globally, and you have an industry in high demand and with definite growth potential.

Insulation materials, as well as techniques, used also continue to evolve. The trend towards sustainable and eco-friendly materials such as lamb’s wool, cellulose – which is made out of recycled newsprint and other paper, or cork, is apparent here as well.

Target Market

The target market for an insulation installer business can vary depending on whether its focus is on commercial, multi-use buildings, or residential homes. Property developers, managers of apartment complexes, landlords, and homeowners will all be needing your business at some point. Size of projects available in your area will determine the size of your business’ workforce. The climate in your area will also significantly influence the services and products an insulation business offers.

Skills, experience, and education useful in running an insulation installation business

Insulation experience. Although you don’t need a college degree to become an insulation installer, it is, of course, vital to have learned your trade and be well versed with installation methods and materials. Being passionate about your craft and championing the benefits of good insulation is equally important.

Knowledge of industry trends. As an insulation installation business owner, you will need to stay up to date with industry trends as well as building regulations and requirements. Your expert knowledge will allow you to advise your customers about the pros and cons of materials and underpin your craft.

Troubleshooting skills. Expecting the unexpected will serve you well within the wider building sector. Be prepared to deal with unforeseen hurdles, especially when dealing with renovations. Thinking on your feet and troubleshooting on the go will help an owner navigate these challenges.

Customer service skills. An insulation installation business is very customer-focused. You will be out and about assessing requirements, advising landlords, homeowners, and property developers, and of course, installing the necessary insulation. A business owner who can provide a great customer experience and build a strong rapport with clients will encourage customer loyalty and achieve client referrals.

Management experience. Previous experience in hiring, training and managing employees will be beneficial for any business with staff. Having a solid understanding of accounting practices. The ability to negotiate and manage contracts will also be a valuable skill.

Costs to Starting an insulation installation business

The cost of starting an insulation installation business will greatly depend on the size of the business, its location, and whether you already have existing resources. You can start an insulation installation business on a budget between $40,000 and $60,000 if you already have your own vehicle or some of the equipment needed, or if you have a large shed or garage you can use at home. On the other hand, if you are starting from scratch, budget between 100,000 and 120,000 to set up your new business.

Common startup costs include:

  • Rent of a suitable warehouse, with an office and possibly a showroom
  • Tools and equipment such as a spray foam machine or blower, protective safety gear, step ladders, power tools, etc.
  • Materials and supplies
  • Company vehicles, like a van or a truck and insulation trailer
  • Signage and marketing
  • Working capital for the first three to six months of payroll, insurance, licensing, rent, utilities, internet, etc.

Checklist for Starting an Insulation Business

If you’re thinking about starting an insulation business, it’s important to do your research first. Here is a checklist to help you get started.

Step 1: Write a Business Plan

After coming up with the business idea, the next step in starting your own insulation installation company should be to write a detailed business plan.  The business plan will make you focus on some important aspects, such as who your competition is, who your customers are, how you plan to reach them, projecting sales and expenses, and much more.

Not only will a bank require you to have a business plan, but multiple studies have shown that a business plan helps increase the odds of starting a successful business.

Related: How to write a business plan

Step 2: Name the Business

Finding the perfect name for your insulation installation business can be challenging. Not only does the name have to resonate with your customers, but it also has to be available to use.

Related: How to do a Trademark Search Before Choosing a Business Name

Step 3: Form a Business 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 an insulation 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 to minimize liability risk 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

It is possible to start a small insulation installation business out of your home if you have a large shed or garage to store the spray rig and any materials. As your business grows, you may need to rent a larger space to safely store vehicles, materials, and equipment. Exact rental costs will depend on the business’ square foot size, location, and amenities.

Related: Choosing a business location

Step 5: Apply for Business Licenses and Permits

An insulation installation business owner will need to obtain a number of business licenses and permits.  In many states and communities as well, a Contractor’s License may be necessary. The requirements to obtain a license varies, however it’s common to need to pass an exam and obtain proof of insurance.  See a list of state contractor licensing boards.

In addition, there will be general licensing requirements such as a business license, sales tax permit, Employer Identification Number (EIN), and others.

While not a license, becoming an ICAA certified insulation provider will provide your business with specialized education and credentials.

Related: Common business licenses, permits, and registrations by state

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 an insulation installation business is another.  It is worthwhile to present your business plan to investors and start-up incubators. If you are in need of a bank loan to get the business off the ground, 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.

Related: Finding the money to start a business

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

You will need to set aside a budget to cover initial as well as ongoing marketing for your insulation installation business. Starting out, going door-to-door to older houses in neighborhoods is a cost-effective way to start marketing (be sure to check if your town requires a solicitation license first). Wearing a nice shirt with your business logo and slacks will provide a better first impression than walking up to a house in dirty clothing. Be sure to bring plenty of professionally designed business cards and flyers as well.

Long-term, a marketing and communications strategy is especially important to raise and continue building awareness of your business. Common marketing channels for insulation installation services include social media marketing, online advertising, print advertising, and direct mail advertising. An insulation installation business owner might even explore radio advertising. Developing a website can be a significant expense, but it can also give a business greater reach and visibility beyond your region. It can be used to facilitate online inquiries and bookings.

Related: Low-cost ideas to market a new business

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 an insulation business. A few of these include:
– General liability insurance protects the business from expenses like medical and legal bills that it could face if a customer is ever hurt while on the business’ property.
– Surety bond, which is a type of insurance that protects consumers in the event that contracted work is not completed.
– 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 an insulation business will vary in cost depending on factors like the business’s location, the value of its inventory, and the number of employees. 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.

Related: Common types of insurance a business may need

Step 10: Hire Employees

You can start your spray foam insulation business very small. However, most insulation installation businesses have a few employees; this is particularly true for businesses servicing larger properties and commercial entities. Think about specific skills you need to hire to compliment your staff and thus extend your business’s services.

In addition to salary costs, a business’ 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. It is also important to factor in ongoing training, certification, and development opportunities for yourself and your staff in your calculations.
Related: Hiring your first employee

Step 11: Set up an Accounting System

Setting up an accounting system for your insulation installation business is critical to the long-term success of your company.
Staying on top of taxes not only keeps the business out of trouble with the government, but good bookkeeping will allow you to monitor and process all invoicing and can be used to track trends and cash flow in the business and maximize profits.

Related: Setting up the accounting for your business

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 an insulation business?

The cost of starting an insulation installation business will greatly depend on the size of the business, its location, and whether you already have existing resources. You can start an insulation installation business on a budget between $40,000 and $60,000 if you already have your own vehicle or some of the equipment needed, or if you have a large shed or garage you can use at home. On the other hand, if you are starting from scratch, budget between 100,000 and 120,000 to set up your new business.

Some of the common startup costs include:
– Rent or purchase a suitable warehouse, with an office and possibly a showroom
– Tools and equipment such as a spray foam machine or blower, protective safety gear, step ladders, power tools, etc.
– Materials and supplies
– Company vehicles, like a spray foam rig, van or a truck and insulation trailer
– Signage and marketing
– Working capital for the first three to six months of payroll, insurance, licensing, rent, utilities, internet, etc.

How much can an insulation business owner make?

According to IBISWorld, industry revenue is projected to rise to $61.2 billion by 2025, an annualized increase of 2.4%. The insulation installation sector is considered a low capital intensity and a low revenue volatility industry. Your profit margin will depend on overheads, your location, and the size of your company. It will also depend somewhat on whether you will offer a specialization, whether you have access to a reliable number of suppliers and whether you need to bring in expertise, such as an accountant or an HR expert. It is also important to understand your competitors in this sector; according to IBISWorld, there are currently almost 25,000 businesses registered in this industry in the US.

In terms of income, according to PayScale, insulation installers earn an average of almost $16 per hour, an experienced insulation installer can expect a salary of up to $24 per hour.

Are there grants to start an insulation business?

It’s extremely rare to find a grant to start an insulation 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 an insulation business?

The NAICS code for an insulation business is 238310.

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?

Resources:
https://www.insulate.org/
https://www.payscale.com/research/US/Job=Insulation_Installer/Hourly_Rate
https://www.ibisworld.com/united-states/market-research-reports/insulation-contractors-industry/
https://www.nascla.org/

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